<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------------
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------- ---------------
Commission file number 0-17224
First Financial Caribbean Corporation
-------------------------------------
(Exact name of registrant as specified in its charter)
Puerto Rico 66-0312162
----------- ----------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification
number)
1159 F.D. Roosevelt Avenue,
Puerto Nuevo
San Juan, Puerto Rico 00920-2998
--------------------- ----------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, (809) 749-7100
including area code --------------
Former name, former address and Not Applicable
former fiscal year, if changed --------------
since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Number of shares of Common Stock outstanding at September 30, 1995 - 7,229,630
---------
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FIRST FINANCIAL CARIBBEAN CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
PART I - FINANCIAL INFORMATION
<S> <C> <C>
Item 1 - Financial Statements
Consolidated Balance Sheet as of September 30, 1995 and December 31, 1994 . . . . . . . . . . . . . 3
Consolidated Statement of Income and Retained Earnings - Quarters ended September 30,
1995 and September 30, 1994 and nine-month period ended September 30, 1995 and
September 30, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statement of Cash Flows - Nine-month period ended September 30, 1995 and
September 30, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . 8
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 2 - Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 3 - Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 4 - Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 5 - Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
2
<PAGE> 3
FIRST FINANCIAL CARIBBEAN CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS EXCEPT FOR SHARE INFORMATION)
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
(unaudited) (audited)
----------- ---------
<S> <C> <C>
ASSETS
- ------
Cash and cash equivalents $ 57,595 $ 35,916
Mortgage loans held for sale, net 183,955 263,773
Mortgage-backed securities held for trading, net 381,363 319,204
Mortgage-backed securities and investments held to maturity 75,247 67,519
Loans receivable, net 63,171 34,809
Accounts receivable and mortgage servicing advances, net 13,064 7,086
Accrued interest receivable 6,882 7,875
Excess servicing fee receivable 10,439 8,757
Property, leasehold improvements and equipment, net 6,692 7,467
Cost in excess of fair value of net assets acquired 6,536 6,609
Real estate held for sale, net 2,044 2,116
Mortgage servicing rights, net 7,781 3,543
Prepaid expenses and other assets 6,376 3,345
-------- --------
Total assets $821,145 $768,019
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Loans payable $219,306 $282,761
Securities sold under agreements to repurchase 361,977 303,730
Convertible Subordinated Debentures 6,646 --
Deposit accounts 99,090 66,471
Advances from Federal Home Loan Bank 10,410 419
Accounts payable and other liabilities 16,011 17,793
Income tax payable 305 2,572
Deferred tax liability 5,609 3,777
-------- --------
Total liabilities 719,354 677,523
-------- --------
Commitments and contingencies
-------- --------
Stockholders' equity:
10.5% Cumulative Convertible Preferred Stock, Series A,
$1.00 par value, 2,000,000 shares authorized; 173,667
shares issued and outstanding (1994 - 204,329) (liquidating
preference of $10 per share, aggregating $1,806,970) 174 204
Common stock, $1.00 par value, 10,000,000 shares
authorized; 7,243,630 shares issued and outstanding (1994- 7,244 7,182
7,182,306)
Paid-in capital 16,644 16,675
Retained earnings 77,952 66,706
-------- --------
102,014 90,767
Treasury stock at par value, 14,000 shares (14) (14)
Unearned compensation under employment contracts (209) (257)
-------- --------
Total stockholders' equity 101,791 90,496
-------- --------
$821,145 $768,019
======== ========
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE> 4
FIRST FINANCIAL CARIBBEAN CORPORATION
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
(In thousands of dollars, except per share data)
Unaudited
<TABLE>
<CAPTION>
Quarter Ended Nine-Month Period Ended
----------------------------- -----------------------------
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Mortgage loans sales and fees $ 4,899 $ 2,704 $ 8,604 $ 9,800
Servicing income 2,603 2,731 8,044 8,764
Interest income 15,749 12,301 46,667 32,976
Gain on sale of servicing rights --- --- 3,623 ---
Rental and other income 114 128 413 366
------- ------- ------- -------
23,365 17,864 67,351 51,906
------- ------- ------- -------
Expenses:
Interest 11,708 6,603 31,892 15,662
Employee cost, net (See Note i) 1,081 648 4,953 4,011
Taxes, other than payroll and income taxes 279 293 802 649
Maintenance 180 201 478 555
Advertising 586 1,264 1,580 3,206
Professional services 667 649 2,044 2,303
Telephone 423 451 1,278 1,530
Rent 531 666 1,550 2,024
Other, net (See Note i) 2,542 2,536 6,303 7,872
------- ------- ------- -------
17,997 13,311 50,880 37,812
------- ------- ------- -------
Income before income taxes and cumulative effect
Income taxes: 5,368 4,553 16,471 14,094
------- ------- ------- -------
Current 85 159 144 361
Deferred 355 512 1,832 1,757
------- ------- ------- -------
440 671 1,976 2,118
------- ------- ------- -------
Income before cumulative effect 4,928 3,882 14,495 11,976
Cumulative effect of change in accounting
principle-adoption of SFAS No. 115, net of income
taxes of $880 --- --- --- 1,215
------- ------- ------- -------
Net income 4,928 3,882 14,495 13,191
Retained earnings at beginning of period 74,159 60,556 66,706 53,219
Less cash dividends paid:
Convertible preferred stock 47 79 144 248
Common stock 1,088 906 3,105 2,709
------- ------- ------- -------
Retained earnings at end of period $77,952 $63,453 $77,952 $63,453
======= ======= ======= =======
Earnings per share:
Primary:
Income before cumulative effect $ 0.68 $ 0.54 $ 1.99 $ 1.68
Cumulative effect --- --- --- .17
------- ------- ------- -------
Net Income $ 0.68 $ 0.54 $ 1.99 $ 1.85
======= ======= ======= =======
Fully Diluted:
Income before cumulative effect $ 0.65 $ 0.51 $ 1.91 $1.58
Cumulative effect --- --- --- .16
------- ------- ------- -------
Net Income $ 0.65 $ 0.51 $ 1.91 $ 1.74
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE> 5
FIRST FINANCIAL CARIBBEAN CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Nine-Month Period Ended
September 30,
-------------------------
1995 1994
---- ----
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,495 $ 13,191
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of excess servicing fee receivable . . . . . . . . . . . . . . . . . 634 348
Amortization of cost in excess of fair value of net assets acquired . . . . . . . 282 296
Amortization of mortgage servicing rights . . . . . . . . . . . . . . . . . . . . 399 540
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . 1,287 1,116
Gain on sale of servicing rights . . . . . . . . . . . . . . . . . . . . . . . . . (3,623) ---
Cumulative effect of change in accounting principle . . . . . . . . . . . . . . . --- (1,215)
Allowances for losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229 206
Origination and purchases of mortgage loans held for sale . . . . . . . . . . . . (386,061) (639,639)
Principal repayment and sales of loans held for sale . . . . . . . . . . . . . . 208,754 177,450
Purchases of mortgage-backed securities held for trading . . . . . . . . . . . . . (68,528) (199,864)
Principal repayments and sales of mortgage-backed securities held for trading . . 259,854 520,018
Decrease (increase) in interest receivable . . . . . . . . . . . . . . . . . . . . 992 (2,499)
(Decrease) increase in loans payable . . . . . . . . . . . . . . . . . . . . . . . (100,445) 37,174
Increase in loans payable related to securities sold not yet purchased . . . . . . 22,090 ---
Increase in interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 339 239
Increase in securities sold under agreements to repurchase . . . . . . . . . . . . 58,247 156,882
Decrease in payables and accrued liabilities . . . . . . . . . . . . . . . . . . . (2,121) (13,343)
Decrease in income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . (2,267) (2,947)
Deferred tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,832 2,637
Amortization of unearned compensation under employment contracts . . . . . . . . . 48 49
---------- ---------
Total adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,058) 37,448
----------- ---------
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . 6,437 50,639
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of mortgage-backed securities and investments held to maturity . . . . . . ( 5,855) (60,941)
Principal repayments of investments held to maturity . . . . . . . . . . . . . . . . 1,768 302
Origination of loans receivable . . . . . . . . . . . . . . . . . . . . . . . . . . (36,354) (9,901)
Principal repayments of loans receivable . . . . . . . . . . . . . . . . . . . . . . 7,992 1,552
Increase in accounts receivable and mortgage servicing advances . . . . . . . . . . (6,207) (50)
Additions to excess servicing fee receivable . . . . . . . . . . . . . . . . . . . . (2,316) (2,472)
Purchase of property, leasehold improvements and equipment . . . . . . . . . . . . . (512) (3,010)
Additions to cost in excess of fair value of net assets acquired . . . . . . . . . . (209) (185)
Proceeds from disposal of real estate held for sale . . . . . . . . . . . . . . . . 1,392 2,300
Acquisition of real estate held for sale . . . . . . . . . . . . . . . . . . . . . . (1,321) (1,718)
Increase in mortgage servicing rights . . . . . . . . . . . . . . . . . . . . . . . (4,722) (626)
Proceeds from sale of servicing rights . . . . . . . . . . . . . . . . . . . . . . . 3,708 ---
Increase in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,031) (1,245)
----------- ---------
Net cash used by investing activities . . . . . . . . . . . . . . . . . . . . . . (45,667) (75,994)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in loans payable related to senior secured term loan and subordinated debt 21,546 ---
issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase in deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,619 33,110
Dividends declared and paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,246) (2,957)
Increase in advances from Federal Home Loan Bank ("FHLB"). . . . . . . . . . . . . . 9,990 ---
Repayment of advances from FHLB . . . . . . . . . . . . . . . . . . . . . . . . . . --- (2,009)
---------- ---------
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . 60,909 28,144
---------- ---------
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . 21,679 2,789
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . 35,916 37,307
---------- ---------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . $ 57,595 $ 40,096
========== =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Noncash financing activities-conversion of preferred stock . . . . . . . . . . . . . $ 307 $ 1,100
========== =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash used to pay interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,553 $ 15,423
========== =========
Cash used to pay income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,965 $ 3,308
========== =========
</TABLE>
The accompanying notes are an integral part of this statement.
5
<PAGE> 6
FIRST FINANCIAL CARIBBEAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
a. The Consolidated Financial Statements (unaudited) have been prepared
in conformity with the accounting policies stated in the Company's
Annual Audited Financial Statements included in the Company's 1994
Annual Report to Stockholders, and should be read in conjunction
with the Notes to the Consolidated Financial Statements appearing in
that report. All adjustments (consisting only of normal recurring
accruals) which are, in the opinion of management, necessary for a
fair presentation of results for the interim periods have been
reflected.
b. The results of operations for the quarter and nine-month period
ended September 30, 1995 are not necessarily indicative of the
results to be expected for the full year.
c. Primary net income per share is determined by dividing net income,
after deducting preferred stock dividends, by the weighted average
number of shares of common stock outstanding considering the
dilutive effect of restricted stock awards. Fully diluted net
income per share has been computed based on the assumption that all
the outstanding shares of the Company's 10 1/2% Cumulative
Convertible Preferred Stock, Series A (the "Series A Preferred
Stock") are converted into common stock. Conversely, no such
assumption was made with respect to the Company's 8.25% Convertible
Subordinated Debentures due January 1, 2006 because such an
assumption would have had an anti-dilutive effect on fully-diluted
net income per share.
d. Cash dividends per share paid for the quarter and nine-month period
ended September 30, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
Quarter Ended Nine-Month Period
September 30, Ended
September 30,
------------------- --------------------
1994 1995 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Series A Preferred Stock $0.2625 $0.2625 $0.7875 $0.7875
Common Stock $0.15 $0.13 $0.43 $0.39
</TABLE>
e. At September 30, 1995, escrow funds include approximately $20.9
million deposited with Doral Federal Savings Bank ("Doral Federal").
These funds are included in the Company's financial statements.
Escrow funds also include approximately $22.0 million deposited with
other banks which are excluded from the Company's assets and
liabilities
f. Certain reclassifications of prior year's data have been made to
conform to 1995 classifications.
g. Investments held to maturity consist of GNMA, FNMA and FHLMC
mortgage-backed securities, U.S. Treasury Notes, Federal Home Loan
Bank Notes and collateralized mortgage obligations.
6
<PAGE> 7
h. The number of average shares of common stock used for computing the
primary and fully diluted net income per share was as follows:
<TABLE>
<CAPTION>
Quarter Ended Nine-Month Period
September 30, Ended
September 30,
---------------------------- ----------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary 7,226,293 6,964,413 7,207,798 6,918,824
Fully diluted 7,576,964 7,576,964 7,576,964 7,576,964
</TABLE>
i. Employee costs and other expenses are shown in the Consolidated
Statement of Income and Retained Earnings net of direct loan
origination costs which, pursuant to SFAS-91, are capitalized as
part of the carrying cost of mortgage loans and are offset against
mortgage loan sales and fees when the loans are sold. Employee
costs would have been $5.9 million and $5.9 million, respectively,
for the quarters ended September 30, 1995 and 1994, and $18.1
million and $21.7 million, respectively, for the nine month periods
ended September 30, 1995 and September 30, 1994, except for the
application of SFAS-91. Other expenses would have been $3.1 million
and $3.3 million, respectively, for the quarters ended September 30,
1995 and 1994, and $8.7 million and $10.7 million, respectively, for
the nine-month periods ended September 30, 1995 and September 30,
1994, except for the application of SFAS-91.
Set forth below is a breakdown of direct loan origination costs that
were deferred pursuant to SFAS-91.
<TABLE>
<CAPTION>
Quarter Ended Nine-Month Period Ended
September 30, September 30,
------------------ --------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Employee Costs $4,829 $5,275 $13,183 $17,651
Other Costs 538 793 2,344 2,853
------ ------ ------- ------
$5,367 $6,068 $15,527 $20,504
====== ====== ======= =======
</TABLE>
j. On May 12, 1995, the Financial Accounting Standards Board issued
Statement of Financial Standards No. 122, "Accounting for Mortgage
Servicing Rights" ("SFAS No. 122"), an amendment to SFAS No. 65.
The Company elected to adopt this standard for its financial
statement reporting in the second quarter of 1995. SFAS No. 122
prohibits retroactive application to 1994. Accordingly, the
Company's financial statement reporting for the first quarter of
1995 and for the quarter and nine-month period ended September 30,
1994 was accounted for under the original SFAS No. 65 and such
results are not directly comparable to the results for the quarter
and nine-months period ended September 30, 1995 with respect to this
specific matter.
For the nine-month period ended September 30, 1995, the Company
realized additional net income of approximately $600,000 (represent-
ing $1.1 million of gross revenues) as a result of the adoption of
SFAS No. 122. If the Company had not adopted SFAS No. 122 in the
second quarter of 1995, the Company would have reported a net income
of approximately $13.9 million for the nine-month period ended
September 30, 1995 and approximately $4.7 million for the quarter
then ended. Earnings per common share would have been approximately
$1.91 and $1.83 on a primary and fully-diluted basis, respectively,
for the nine-
7
<PAGE> 8
month period ended September 30, 1995 and approximately $0.64 and
$0.62 on a primary and fully-diluted basis, respectively, for the
quarter then ended.
SFAS No. 122 requires that a portion of the cost of originating a
mortgage loan be allocated to the mortgage servicing right based on
its fair value relative to the aggregate fair value of the loan and
the related servicing right taken as a whole. To determine the fair
value of the servicing rights created after the adoption of SFAS No.
122, the Company used the market prices under comparable servicing
sale contracts.
SFAS No. 122 also requires that all capitalized mortgage servicing
rights be evaluated for impairment based on the excess of the
carrying amount of mortgage servicing rights over their fair value.
For purposes of measuring impairment, capitalized mortgage servicing
rights are stratified pool by pool on the basis of interest rates.
An impairment is recognized whenever the prepayment pattern of the
mortgage pool indicates that the fair value of the related
capitalized servicing rights is less than its carrying amounts. An
impairment is recognized by charging such excess to income. The
Company determined that no reserve for impairment was required for
the nine months ended September 30, 1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's business requires continuous access to short-term sources of debt
financing and equity capital. The Company's cash requirements arise from loan
originations and purchases, repayments of debt upon maturity, payments of
operating and interest expenses and servicing advances. The Company's primary
sources of liquidity are sales in the secondary mortgage market of the loans it
originates and purchases, short-term borrowings under warehouse, gestation and
repurchase agreement lines of credit (secured by pledges of its loans and
mortgage-backed securities in most cases until such loans are sold and the
lenders repaid) and revenues from operations. In the past, the Company has
also relied on privately-placed financings and public offerings of preferred
and common stock. The Company recently entered into a syndicated bank
agreement which included a revolving credit facility and servicing secured
facility. In addition, during the third quarter of 1995 the Company executed a
debenture purchase agreement with a financial institution providing for the
issuance and sale in a private placement transaction of up to $10,000,000 of
its 8.25% Convertible Subordinated Debentures due on January 1, 2006, (the
"Convertible Debentures").
Total liabilities were approximately 7.1 and 7.5 times stockholders' equity at
September 30, 1995 and December 31, 1994, respectively. The Company's leverage
at September 30, 1995 reflects an increase in stockholders' equity of $11.3
million and increases in deposit accounts and advances from the Federal Home
Loan Bank of New York ("FHLB-NY").
FFCC borrows money under warehousing lines of credit to fund its mortgage loan
commitments and repays the borrowings as the mortgages are sold. The
warehousing lines of credit then become available for additional borrowings.
Included among FFCC's warehousing line of credit facilities are gestation or
pre-sale facilities which permit the Company to obtain more favorable rates
once mortgage loans are in the process of securitization but prior to the
actual issuance of the mortgage-backed securities as well as to finance such
mortgage-backed securities upon their issuance. FFCC held mortgage loans
(including mortgage loans converted into mortgage-backed securities) prior to
sale for an average period of approximately 348 days for the nine-month period
ended September 30, 1995 and 212 days during the year ended December 31, 1994.
The increase in the days mortgage loans were held prior to sale was due to
higher levels of mortgage-backed securities held for trading resulting from a
decision made by the Company to hold such mortgage-backed securities for longer
periods of time prior to sale in order to maximize net interest income. At
September 30, 1995 and December 31, 1994, FFCC had available warehousing lines
of credit, including gestation lines of credit, of $700 million and $442
million, respectively. At September 30, 1995 and December 31, 1994, FFCC had
used approximately $177 million and $276 million, respectively, of credit
available under its warehousing lines of credit. FFCC's warehousing lines of
credit are generally subject to termination at the discretion of the lender.
8
<PAGE> 9
FFCC also obtains short-term financing for its mortgage-backed securities
portfolio through repurchase agreement lines of credit with financial
institutions and investment banking firms. Under these agreements, FFCC sells
GNMA, FNMA, FHLMC-guaranteed mortgage-backed securities or collateralized
mortgage obligations and simultaneously agrees to repurchase them at a future
date at a fixed price. FFCC uses the proceeds of such sales to repay
borrowings under its warehousing lines of credit. The effective cost of funds
under repurchase agreements is typically lower than the cost of funds borrowed
under FFCC's warehousing lines of credit. At September 30, 1995, FFCC had used
approximately $354 million of credit under repurchase agreements. FFCC's
continued use of repurchase agreements will depend on the cost of repurchase
agreements relative to the cost of borrowing under its warehousing lines of
credit with banks.
Borrowings under gestation credit facilities used to finance whole loans are
classified as "Loans payable" on the Company's Consolidated Balance Sheet while
borrowings under such credit facilities used to finance mortgage-backed
securities are classified as "Securities sold under agreements to repurchase."
The monthly weighted average interest rate of FFCC's borrowings for warehousing
lines of credit and for repurchase agreement lines of credit was 7.2% and
5.9%, respectively, for the nine-month period ended September 30, 1995
compared to 5.7% for warehousing lines of credit and 4.3% for repurchase
agreements in each case for the year ended December 31, 1994.
On June 30, 1995, FFCC entered into a syndicated credit agreement (the
"Syndicated Credit Agreement") with six banks providing for three credit
facilities totaling up to $125 million. The credit facilities were structured
by Bankers Trust Company, as administrative and syndicate agent. The three
facilities include: (i) a $100 million secured one- year revolving warehousing
credit facility to finance residential mortgage loans and mortgage-backed
securities, (ii) a $7 million secured one-year revolving credit facility to
provide financing for receivables and working capital needs, and (iii) an $18
million five-year senior secured term loan, secured with a portion of the
Company's servicing portfolio, to finance the acquisition of additional
servicing rights and general working capital purposes. The amounts available
under the Syndicated Credit Agreement are subject to a borrowing base which
consists of mortgage loans and mortgage-backed securities for the first
facility, receivables relating to servicing advances and real estate owned for
the second facility and mortgage servicing rights for the third facility. At
September 30, 1995, FFCC had drawn $14.9 million under the five-year senior
secured term loan which is due and payable on June 30, 2000 and bears interest
at a variable rate which is adjusted periodically and is based on a spread over
one of various indices to be selected by the Company (7.95% at September 30,
1995). This borrowing is classified as "Loans Payable" on the Company's
Consolidated Balance Sheet.
On September 25, 1995, the Company executed a Debenture Purchase Agreement (the
"Debenture Purchase Agreement") with BanPonce Corporation ("BanPonce"), a bank
holding company headquartered in San Juan, Puerto Rico, providing for the
issuance and sale to BanPonce of up to $10,000,000 of Convertible Debentures in
a private placement transaction. The Convertible Debentures will not be
registered under the Securities Act of 1933 (the "Securities Act") and may not
be offered or sold in the United States absent such registration or an
applicable exemption from the registration requirements of the Securities Act.
The Convertible Debentures are convertible into shares of Common Stock of the
Company at a conversion price of $17.50 per share, subject to adjustment in
certain events. The Convertible Debentures are subordinated to all existing
and future senior debt (as defined in the Debenture Purchase Agreement) of the
Company. On September 25, 1995, the Company issued to BanPonce $6,645,905 of
the Convertible Debentures (convertible into approximately 4.99% of the
outstanding shares of Common Stock of the Company) concurrently with the
execution of the Agreement. The issuance and sale of the remaining $3,354,095
of Convertible Debentures is subject to BanPonce obtaining approval of the
Federal Reserve Board for the additional
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investment in the Convertible Debentures. Under the terms of the Debenture
Purchase Agreement, BanPonce has 90 days from the date of the execution of the
Debenture Purchase Agreement to obtain such approval. If the entire
$10,000,000 of the Convertible Debentures are issued, they would be convertible
into 571,428 shares or 7.3% of the Company's total outstanding shares of Common
Stock as of September 30, 1995, assuming the conversion of all outstanding
shares of Series A Preferred Stock and all outstanding Convertible Debentures.
Under the terms of the Debenture Purchase Agreement, BanPonce also obtained the
right to acquire up to 200,000 additional shares of Common Stock at a price of
$17.50 per share (subject to adjustment in certain events) to the extent that
the shares of Common Stock issued or issuable upon conversion of the
Convertible Debentures represent less than 5% of the Company's fully diluted
outstanding shares of Common Stock. If BanPonce does not consummate the
acquisition of the additional $3,354,095 Convertible Debentures as a result of
its inability to obtain Federal Reserve Board approval, such 5% threshold would
be reduced proportionally. Such right to acquire additional shares expires on
June 30, 1999 and is subject to termination upon the occurrence of certain
corporate events involving the acquisition of the Company.
The Company is prohibited under the Debenture Purchase Agreement from paying
dividends on any capital stock (other than dividends payable in capital stock
or in stock rights), if an event of default under such agreements exists at
such time, or if the amount of dividends payable by the Company together with
the aggregate amount of dividends paid and other capital distributions made
since June 1, 1995, exceed the sum of (i) 50% of the Company's Consolidated Net
Income (as defined in the Debenture Purchase Agreement) accrued from June 1,
1995 to the end of the quarter ending not less than 45 days' prior to the
dividend payment date; (ii) $20 million; and (iii) the net proceeds of any sale
of capital stock subsequent to June 1, 1995. In addition, under the Debenture
Purchase Agreement, the Syndicated Credit Agreement and other debt agreements
of the Company, if the Company fails to maintain specified minimum levels of
net worth, net earnings to debt service and dividends, and certain other
financial ratios, dividends cannot be paid by the Company.
The Company also has entered into servicing agreements relating to the
mortgage-backed securities programs of FNMA, FHLMC and GNMA and certain other
investors as well as mortgage loans sold to certain other purchasers.
These agreements require FFCC to advance funds to make scheduled payments of
principal, interest, taxes and insurance, if such payments have not been
received from the borrowers. Funds advanced by FFCC pursuant to these
arrangements are generally recovered by FFCC within 30 days. During the
nine-month period ended September 30, 1995, the monthly average amount of funds
advanced by the Company under such servicing agreements was approximately $4.9
million.
During the nine-month period ended September 30, 1995, the Company collected an
average of approximately $900,000 per month in net servicing fees, including
late charges. At September 30, 1995 and December 31, 1994, the servicing
portfolio amounted to approximately $2.6 billion. The relatively stable amount
of the servicing portfolio as of September 30, 1995 compared to December 31,
1994, despite originations of $365.8 million during 1995 is due to the sale
during the second quarter of 1995 of approximately $208 million of servicing
rights and regular portfolio run-offs. The Company may, from time to time,
determine to sell portions of its servicing portfolio as well as to purchase
servicing rights from third parties.
As of September 30, 1995, Doral Federal met all its fully phased-in capital
requirements (i.e., tangible and core capital of at least 1.5% and 3.0%,
respectively, of adjusted assets and risk-based capital at least 8% of risk
adjusted assets). As of September 30, 1995 Doral Federal had tangible capital
and core capital of $8.1 million or approximately 6.67% of adjusted assets. As
of such date, Doral Federal had risk-based capital of $8.3 million or 16.7% of
risk adjusted assets.
Doral Federal obtains funding for its lending activities through the receipt of
deposits and to a lesser extent from other borrowings such as FHLB-NY advances
and repurchase agreements with brokerage houses. As of September 30, 1995,
Doral Federal held $106.8 million in deposits at a weighted average interest
rate of 2.57%, approximately 33% of which consisted of non-interest bearing
deposits. Doral Federal, as a member of Federal Home Loan Bank of New York
(the "FHLB-NY"), also has access to collateralized borrowings from the
FHLB-NY up to a maximum of 30% of its total assets. Such advances must be
secured by qualifying assets with a value equal to between 105% to 115% of the
advances. As of September 30, 1995, Doral Federal had $10.4 million in
outstanding advances from the FHLB-NY at a weighted average interest rate cost
of 6.43% and $16.3 million of available collateral to obtain additional
advances.
Legislation has been proposed by Congress that would, among other matters,
recapitalize the FDIC Savings Association Insurance Fund (the "SAIF"). The
proposed legislation provides for a one-time assessment to be imposed on all
SAIF-insured deposits as of June 30, 1995, in order to recapitalize the SAIF
and eliminate the disparity of insurance premiums with the Bank Insurance Fund
(the "BIF"). Under such proposed legislation, the SAIF and the BIF would be
merged effective January 1, 1998. The special assessment rate is anticipated
to be between .85% to .90% of deposits and would be payable in early 1996.
Based upon Doral Federal's deposits at June 30, 1995 and assuming a special
assessment of .90%, Doral Federal's assessment would be approximately $864,000
on a pre-tax basis.
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FFCC expects that it will continue to have adequate liquidity arrangements to
finance its operations. The Company will continue to explore alternative and
supplementary methods of financing its operations, including both debt and
equity financing. There can be no assurance, however, that the Company will be
successful in consummating any such transactions.
Cash Flows
The interim Consolidated Statement of Cash Flows reflect the working capital
needs of the Company. Operating activities provided approximately $6.4 million
of net cash during the nine-month period ended September 30, 1995, versus
approximately $50.6 million in the comparable period of 1994. The major
changes in cash flow for the first nine months of 1995 were primarily related
to a net decrease of approximately $18 million in the Company's portfolio of
mortgage loans held for sale and mortgage-backed securities held for trading.
Borrowings reflect increased use of repurchase and gestation lines of credit
which require lower collateralization levels than bank warehousing lines of
credit. In addition, the Company incurred $22.1 million in liabilities
related to securities sold not yet purchased in connection with its interest
rate risk management strategy.
Investing activities used cash of approximately $45.7 million in the first nine
months of 1995 due primarily to net originations of loans receivable of
approximately $36.4 million. The Company capitalized $4.7 million of mortgage
servicing rights during the first nine months of 1995 related to wholesale
mortgage loan purchases and implementation in the second quarter of 1995 of
SFAS No. 122. When the Company purchases mortgage loans together with the
related servicing rights, a portion of the purchase price is allocated to the
servicing rights acquired. SFAS No. 122 requires that a portion of the cost of
originating a mortgage loan be allocated to the related mortgage servicing
right based on its fair value relative to the aggregate fair value of the loan
and the related servicing right taken as a whole. Investing activities also
reflected an increase in short term servicing advances and accounts receivable
of $6.2 million.
During the first nine months of 1995, financing activities provided
approximately $60.9 million of net cash due to additional deposit accounts
amounting to approximately $32.6 million received by Doral Federal, the
Company's thrift subsidiary and $21.5 million representing the proceeds of a
senior secured term loan under the Company's syndicated bank facility and the
issuance of $6,645,905 of Convertible Debentures. Dividend payments were
approximately $3.2 million for the nine months ended September 30, 1995.
ASSETS AND LIABILITIES
At September 30, 1995, total assets were $821 million compared to $768 million
at December 31, 1994. This increase was due to several factors of which the
most important include a net increase of $28.4 million in loans receivable held
at Doral Federal and a $21.7 million increase in cash and cash equivalents.
These increases were partially offset by a net decrease of $10 million in
mortgage loans held for sale and mortgage-backed securities
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held for trading and for investment. Total liabilities were $719 million at
September 30, 1995 compared to $678 million at December 31, 1994. This
increase was largely the result of an increase in deposit accounts and advances
from the FHLB-NY in the aggregate amount of $43 million. Securities sold
under agreements to repurchase increased by $58.2 million while loans payable
decreased $63.5 million compared to December 31, 1994 reflecting changes in
the composition of the Company's inventory. As of September 30, 1995, the
Company was carrying a greater amount of mortgage-backed securities inventory
while the amount of mortgage loans held for sale had decreased.
As of September 30, 1995, Doral Federal had $126.5 million in assets compared
to $86 million at December 31, 1994. This increase was due primarily to an
increase of $28.4 million in loans receivable. Loans receivable and
investments owned by Doral Federal are classified as held to maturity. At
September 30, 1995, Doral Federal's deposit accounts totalled $99.1 million
compared to $66.5 million at December 31, 1994. These amounts are net of $7.7
million and $12.8 million in corporate accounts of the Company which are
eliminated in the preparation of the Company's Consolidated Financial
Statements. Deposit accounts include $20.9 million in non-interest bearing
demand deposits representing escrow funds and other servicing accounts from
FFCC's servicing operations as well as FFCC corporate accounts. All other
deposits at September 30, 1995, are retail deposits, most of them in the form
of certificate of deposit accounts. The increase in deposits is due to an
aggressive campaign to attract funds by offering competitive interest rates.
The Company's Mortgage Banking Business is subject to the risk that
future changes in interest rates may adversely affect the value of the
Company's portfolio of mortgage loans and mortgage-backed securities. Interest
rate fluctuations may also adversely affect net interest income. FFCC attempts
to minimize these risks through the use of forward commitments and other
hedging techniques.
The Company does not generally hedge conventional loans in the pipeline
or in the process of origination because these loans are generally offered to
customers at a certain spread over a prevailing rate that adjusts weekly rather
than at a fixed rate. In the case of FNMA and FHLMC conforming loans and FNMA
and FHLMC mortgage-backed securities, the Company seeks to obtain commitments
for the purchase of such loans or mortgage-backed securities following the
funding of such loans. These loans are normally sold to institutional
investors or at the FNMA and FHLMC cash windows. To the extent the Company
does engage in offerings of mortgage products which lock-in the interest rate
until the closing date, it attempts to obtain forward commitments at the time
it fixes the rates for the loans. At September 30, 1995, the amount of forward
commitments was $34.3 million.
In the case of GNMA securities, the Company normally holds such securities for
longer periods prior to sale in order to maximize its net interest income and
to take advantage of the tax exempt status of the interest on such securities
under Puerto Rico law. The Company has in place long-term repurchase
agreements secured by GNMA certificates with a principal amount of
approximately $37 million. The Company does not obtain forward commitments for
such GNMA certificates because they are financed pursuant to long-term
repurchase agreements. The Company has the right to substitute GNMA
certificates subject to the repurchase agreements with similar GNMA
certificates at any time. Prices for GNMA certificates in Puerto Rico tend to
be more stable than on the mainland U.S. because of the tax exempt status of
interest paid on these securities under Puerto Rico law. This relative
stability of prices for Puerto Rico GNMA securities allows the Company to
implement a less aggressive hedging strategy to attempt to protect the value of
these assets than what might otherwise be required.
In the case of nonconforming conventional loans and GNMA mortgage-backed
securities not subject to long term repurchase agreements, the Company seeks to
protect itself from interest rate risk by purchasing listed options on treasury
bond futures contracts and other interest rate sensitive instruments.
Contracts designated as trading hedges are marked-to-market on a monthly basis
with the resulting gains and losses charged to operations. Changes in the
market value of futures contracts that qualify as hedges of existing assets and
liabilities are recognized as an adjustment to the value of the asset or
liability being hedged. The level of investment in such options is increased
or decreased in relation to interest rates changes and other market factors.
The operations of the Company are also subject to interest rate risk because
its interest earning assets and interest-bearing liabilities reprice at
different times and varying amounts. FFCC's loans held for sale and
mortgage-backed securities held for trading inventories are fixed rate
interest-earning assets that are not subject to repricing (except for
replacement of assets through repayments, sales and new originations) while the
short-term borrowings used to finance these positions normally reprice on a
quarterly basis. To protect against major fluctuations in short-term interest
rates, the Company purchases listed put options on financial instruments,
including Eurodollars contracts. This policy attempts to ensure a relatively
stable short-term cost of funds.
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In the future, FFCC may utilize alternative hedging techniques including
futures, options or other synthetically created hedge vehicles to help mitigate
interest rate and market risk. However, there can be no assurance that any of
the above hedging techniques will be successful. To the extent they are not
successful, the Company's profitability may be adversely affected. For the
nine months ended September 30, 1995 the Company experienced hedging losses of
$2.8 million, while for the year ended December 31, 1994, the Company
experienced hedging gains of $2.2 million. Losses on hedging activities are
generally indicative of higher gains on mortgage loans and mortgage-backed
securities.
At September 30, 1995, investments held to maturity consisted of GNMA, FNMA and
FHLMC mortgage-backed securities, U.S. Treasury Notes, Federal Home Loan Bank
Notes and collateralized mortgage obligations. The Company has the intent and
ability to hold the investments to maturity by obtaining continuing financing
under its existing credit facilities. A portion of these securities are held
at Doral Federal and the maturity of such securities generally have been
matched against deposits.
As of September 30, 1995, FFCC held $2.0 million of real estate owned, compared
to $2.1 million as of December 31, 1994.
RESULTS OF OPERATIONS FOR QUARTERS ENDED SEPTEMBER 30, 1995 AND 1994
Net income for the quarter ended September 30, 1995 increased to $4.9 million
from $3.9 million for the comparable period of 1994. Doral Federal contributed
approximately $580,000 to the consolidated net income of the Company for the
third quarter of 1995 compared to approximately $56,000 for the third quarter
of 1994.
Results for the third quarter of 1995 reflect the adoption by the Company, as
of April 1, 1995, of SFAS No. 122. See Note j to "Notes to Consolidated
Financial Statements (Unaudited)" herein. For the quarter ended September 30,
1995, additional net income of approximately $250,000 was realized as a result
of the adoption of this prouncement. Since SFAS No. 122 prohibits retroactive
application, historical accounting results have not been restated and,
accordingly results for the quarter ended September 30, 1995 are not directly
comparable to the quarter ended September 30, 1994 with respect to the
application of SFAS No. 122.
Revenues from mortgage loan sales and origination fees increased to $4.9
million for the quarter ended September 30, 1995 from $2.7 million for the
comparable period of 1994. This increase was due to higher origination fees
obtained during the quarter which in turn has the effect of increasing gains on
the disposition of such loans. The increase in mortgage loan sales and fees
also reflected hedging gains of approximately $509,000 for the quarter ended
September 30, 1995, compared to hedging gains of $129,000 for the quarter ended
September 30, 1994. Mortgage loan sales and fees for the quarter ended
September 30, 1995, were net of approximately $400,000 of gross unrealized
losses relating to Company's mortgage-backed securities held for trading
portfolio while mortgage loan sales and fees for the third quarter of 1994
included approximately $1.5 million of gross unrealized gains. As a result of
the adoption of SFAS No. 115, unrealized gains and losses on mortgage-backed
securities held for trading after January 1, 1994 are included in earnings as a
component of mortgage loan sales and fees. Mortgage loan sales and fees also
reflect the adoption during the second quarter of SFAS No. 122, which requires
the recognition of internally originated servicing rights ("OMSRs"). Under
prior accounting practices, OMSRs were not recognized as assets and were
charged to earnings when the related loans were sold. SFAS No. 122 has the
effect of increasing gains on sales of mortgages by requiring that the carrying
cost of the loan be reduced by the amount allocated to the related OMSRs.
Mortgage loan sales and fees for the quarter ended September 30, 1995 include
additional gains of approximately $432,000 for the third quarter of 1995 as a
result of the adoption of SFAS No. 122.
The total volume of loans originated and purchased was $156 million for the
three-month period ended September 30, 1995 compared to $153 million for the
three-month period ended September 30, 1994. The total
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volume of loans purchased from third parties was approximately $13 million for
the three-month period ended September 30, 1995 compared to $32 million for the
comparable period of 1994.
During the third quarter of 1995, the Company continued to realize a
substantial percentage of total revenues from interest income associated with
the Company's mortgage-backed securities inventory. Net interest income
decreased by $1.7 million in the third quarter of 1995, versus the comparable
period of 1994 decreasing from $5.7 million to $4.0 million. The decrease in
net interest income for the quarter reflects decreased interest spreads as
short-term interest rates payable on warehousing and repurchase agreements line
of credit have not decreased as rapidly as mortgage interest rates. The
interest rate spread also reflects a $14.9 million servicing secured term loan
which is not collateralized by interest earnings assets. During the second
quarter of 1995, the Company entered into a $14.9 million term loan secured by
its servicing portfolio and on September 25, 1995 the Company issued $6.6
million of its Convertible Debentures. The Company's weighted average interest
rate spread was 227 basis points during the third quarter of 1995 compared to
410 basis points for the comparable period of 1994.
When FFCC sells the mortgage loans it has originated or purchased, it generally
retains the rights to service such loans and receives the related servicing
fees. Mortgage loan servicing fees are based on a percentage of the principal
balances of the mortgages serviced and are credited to income as mortgage
payments are collected. Loan servicing income decreased 5% to $2.60 million
for the quarter ended September 30, 1995 compared to $2.73 million for the same
period in 1994. The decrease is primarily attributable to sales of servicing
rights totalling approximately $400 million in the aggregate made in the fourth
quarter of 1994 and second quarter of 1995 and higher amortization of excess
servicing. The Company's servicing portfolio totaled $2.6 billion at September
30, 1995 compared to $2.7 billion at the same date a year ago.
FFCC capitalizes as an asset an excess servicing fee on loans sold with
servicing rights retained whenever the stated servicing fee rate is materially
higher than servicing fee normally permitted by FNMA, GNMA or FHLMC. The
excess servicing fee receivable is recognized at the time of sale as an
adjustment to the resulting gain or loss on the loans sold and is recorded in
the accompanying Consolidated Statement of Income and Retained Earnings under
"Mortgage loan sales and fees." Amortization of excess servicing fee
receivable is based on the amount and timing of estimated future cash flows.
The amortization of excess servicing fee receivable is recorded as a reduction
of servicing income. Amortization of such excess servicing fee receivable for
each of the quarters ended September 30, 1995 and 1994 was approximately
$143,000 and $145,000, respectively.
The cost of acquiring the rights to service mortgage loans is capitalized by
the Company on its financial statements. The amount capitalized is amortized
in proportion to, and over the period of, estimated net servicing income. Any
unamortized balance related to rights sold is charged to income at time of
sale. Capitalized purchased servicing rights are analyzed quarterly by
stratifying the mortgage servicing portfolio and reviewing the payment history
on a pool-by- pool basis. Whenever it is determined that there is a prepayment
pattern indicative that the fair value of the purchased mortgage servicing
rights (determined based on estimated future net cash flows discounted at
current rates) will be less than their carrying amounts, an impairment is
recognized by charging such excess to income. Effective April 1, 1995, with
the adoption of SFAS No. 122, the Company is also required to capitalize and
amortize OMSRs in the same manner as purchased mortgage servicing rights. See
Note j to "Notes to Consolidated Financial Statements (Unaudited)" herein. At
September 30, 1995, the unamortized balance of servicing rights approximates
their fair value. The amortization of mortgage servicing rights for the
quarters ended September 30, 1995 and 1994 was $125,000 and $180,000,
respectively, and is recorded in the accompanying Consolidated Statement of
Income and Retained Earnings under "Other Expenses." During the third quarter
of 1995, the Company purchased approximately $13 million in FHA-insured and
VA-guaranteed mortgages from third parties. As a result of such acquisitions,
the Company capitalized approximately $227,500 in servicing rights during the
third quarter of 1995. In addition, as a result of the adoption of SFAS No.
122, as of the September 30, 1995 the Company had capitalized approximately
$2.4 million in OMSRs.
Aggregate expenses for the quarter ended September 30, 1995, increased by
approximately $4.7 million compared to the third quarter of 1994, as a result
of higher interest expense associated with the financing of the Company's
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mortgage loans and mortgage-backed securities portfolios. All other expenses
associated with the loan origination and general and administrative decreased
to $6.3 million for the quarter ended September 30, 1995 compared to $6.7
million a year ago as a result of cost reduction measures implemented by
management in line with the reduction in the volume of mortgage loan
originations.
The provision for income taxes decreased to $440,000 for the three-month period
ended September 30, 1995, compared to $671,000 for the three-month period ended
September 30, 1994, as a result of a decrease in the Company's effective tax
rate. The decrease in the effective tax rate was due primarily to an increase
in the proportion of total income before taxes consisting of tax exempt income.
Interest on FHA and VA mortgages secured by real property in Puerto Rico and
GNMA mortgage-backed securities consisting of such mortgages are tax exempt
under Puerto Rico law.
RESULTS OF OPERATIONS FOR NINE MONTHS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER
30, 1994
The Company's net income for the nine months ended September 30, 1995,
increased to $14.5 million, compared to $13.2 million for the corresponding
period in 1994. Consolidated results include the operations of Doral Federal,
which was acquired by the Company in September 1993. For the nine-month period
ended September 30, 1995, Doral Federal contributed approximately $1.2 million
to the Company's consolidated net income compared to $58,000 for the nine
months ended September 30, 1994. Results for the first nine months of 1995
reflect the adoption by the Company as of April 1, 1995 of SFAS No. 122.
Additional net income of approximately $600,000 (representing $1.1 million of
gross revenues) million was realized for the nine months ended September 30,
1995, as a result of the adoption of SFAS No. 122. Since SFAS No. 122 does not
permit retroactive application, the results for the first nine months of 1995
and 1994 are not directly comparable. Earnings for the first nine months of
1995 reflected a $3.6 million gain from the sale of mortgage servicing rights.
No such sales were made in the first nine months of 1994. Nine months results
for 1994 include a one-time benefit of $1.2 million from the cumulative effect
of the adoption of SFAS No. 115 "Accounting for Certain Investments in Debt and
Equity Securities" as of January 1, 1994.
Revenues from mortgage loan sales and fees decreased 12% to $8.6 million from
$9.8 million a year ago. This decrease was due, in part, to a lower volume of
loan originations. The total volume of loans originated and purchased was
approximately $422 million for the nine-month period ended September 30, 1995
compared to approximately $650 million for the nine-month period ended
September 30, 1994. The decrease of 35% in loan originations and purchases was
the result of decreased demand for mortgage loans, especially refinancing
loans. Refinancing loans comprised 41% of loan originations in the first nine
months of 1995 compared to 64% for the same period in 1994. The decrease also
reflected hedging losses of approximately $2.8 million for the first nine
months of 1995 compared to hedging gains of $1.2 million for the first nine
months of 1994. Mortgage loan sales and fees also reflect approximately $1.1
million of additional gain on sale of mortgage loans as the result of the
adoption of SFAS No. 122 during the second quarter of 1995. SFAS No. 122 has
the effect of increasing gains on the sales of loans by requiring that the
carrying cost of the loans be reduced by the amount of the related OMSRs.
Following the adoption of SFAS No. 115, effective January 1, 1994, unrealized
gains and losses on holdings of trading securities are included in earnings as
a component of mortgage loan sales and fees. Mortgage loan sales and fees for
the nine-month period ended September 30, 1995, included $1.9 million in gross
unrealized gains on the Company's mortgage-backed securities held for trading
portfolio during such period compared to $429,000 of gross unrealized gains for
the comparable period of 1994.
Net interest income decreased by approximately $2.5 million or 15% for the
nine-month period ended September 30, 1995 versus the comparable period of
1994. The decrease in net interest income for the nine-month period reflects
decreased interest spreads as mortgage interest rates have declined more
rapidly than short-term interest rates payable on warehousing and repurchase
agreement lines of credit. The interest rate spread also reflects higher
financing costs associated with a servicing secured term loan under the
Company's syndicated bank credit facility. The
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weighted average interest rate spread was 277 basis points during the nine
months ended September 30, 1995 compared to 415 basis points for the comparable
period of 1994.
Loan servicing income decreased 9% to $8.0 million for the nine-month period
ended September 30, 1995 compared to $8.8 million for the same period in 1994.
The decrease in loan servicing income is due primarily to sales aggregating
approximately $400 million of servicing rights made in the fourth quarter of
1994 and second quarter of 1995 and higher amortization of excess servicing
fees receivable. Amortization of excess servicing fee receivable for each of
the nine-month period ended September 30, 1995 and 1994 was approximately
$634,000 and $348,000, respectively. The amortization of excess servicing fee
receivable is recorded as a reduction of servicing income. For the nine-month
periods ended September 30, 1995 and 1994, amortization of mortgage servicing
rights was $399,000 and $540,000, respectively, and was recorded as a component
of "Other Expenses." Effective April 1, 1995, with the adoption of SFAS No.
122, OMSRs must be amortized in the same manner as purchased mortgage servicing
rights.
Aggregate expenses for the nine months period ended September 30, 1995
increased by $13.1 million compared to the same period for 1994, as a result of
higher interest expense associated with the financing of the Company's mortgage
loans and mortgage-backed securities portfolios. Loan origination, general and
administrative expenses decreased by $3.2 million compared to the same period
for 1994, as a result of cost reduction measures implemented by management in
line with the reduction in the volume of mortgage loan originations.
The provision for income taxes decreased to $2.0 million for the nine-month
period ended September 30, 1995, compared to $3.0 million for the nine-months
ended September 30, 1994, including $880,000 attributed to the cumulative
effect of adopting SFAS No. 115, due to a decrease in the effective tax rate
from 18.5% to 12%. The decrease in the effective income tax rate was due
primarily to an increase in the proportion of total income before taxes
consisting of tax exempt income. Interest on FHA and VA mortgage loans secured
by residential property in Puerto Rico and GNMA mortgage-backed securities
composed of such loans is tax exempt under Puerto Rico law.
PROSPECTIVE TRENDS
Market Trends. During most of 1995, interest rates on mortgage loans
declined significantly. To the extent such trend continues, demand and prices
for mortgage loans and mortgage-backed securities should increase thereby
favorably impacting gain on sale of mortgage loans.
The decrease in interest rates should also contribute to an increase in
the amount of originations by stimulating demand for mortgage loans. Increased
originations will allow the Company to increase the size of its servicing
portfolio. Servicing income should, therefore, continue to provide the Company
with a stable base of revenue. The Company believes that its strong internal
origination capacity will reduce the sensitivity of servicing fee income to any
changes in prepayment rates that may occur as a result of declines in interest
rates.
Doral Federal. The Company intends to continue to increase the asset
size of Doral Federal by increasing the amount of loans funded at and held by
Doral Federal. The Company expects that the net interest income earned by
Doral Federal will make increasingly significant contributions to the
consolidated net earnings of the Company.
Proposed Repeal of Section 936. The budget bills passed in October 1995
by both the House of Representatives and the Senate contain provisions
providing for the repeal Section 936 ("Section 936") of the Internal Revenue
Code.
The House bill (the "House Proposal") would generally repeal Section 936
for taxable years beginning after December 31, 1995. However, corporations
that qualified for and elected the credit (the "936 Credit") under Section 936
available for a base year would continue to be eligible to claim the 936 Credit
for an additional ten years
16
<PAGE> 17
under a special grandfather rule. A corporation that adds a substantial new
line of business after September 13, 1995, would cease to be eligible to claim
the Section 936 Credit under this grandfather rule, beginning with the taxable
year in which such new line of business is added.
Under the House Proposal, that amount of income that would be eligible
for the 936 Credit during the grandfather period would be subject to a cap
equal to the corporation's average possession income from the base period
years, adjusted for inflation. A taxpayer's possession income would equal the
sum of its active business income and QPSII. The average possession income
would be based on the average income of the taxpayer's five most recent years
ending before September 13, 1995, determined by disregarding the taxable years
in which inflation adjusted possession incomes were highest and lowest. If a
taxpayer's possession income in a year during the grandfather period exceeds
the cap, then such possession income for purposes of the 936 Credit would be an
amount equal to the cap.
The Senate bill (the "Senate Proposal") provides for the repeal of
Section 936 in six years, i.e., after year 2001 (the "Senate Proposal"). Under
the Senate Proposal, the income credit under the 936 Credit would be reduced by
5% every year after 1998 and repealed after year 2001. No limitations on the
volume of income nor the manufacturing of new products is imposed as under the
House Proposal. Corporations not currently covered by Section 936 could elect
to be covered thereunder until year 2001. The Senate Proposal does not change
the economic activity credit under the 936 Credit for the next six years, i.e.,
until year 2001. The Senate Proposal repeals the 936 Credit for QPSII
attributable to investments made after October 13, 1995. Under a grandfather
rule, however, the 936 Tax Credit is available until year 2001 for QPSII
attributable to investments made before October 14, 1995.
The two bills will now be referred to a Congressional conference
committee for resolution of any differences between them, and the bill as
finally approved by both houses of Congress will be presented to the President
for his signature or veto.
The repeal of the Section 936 as contemplated by the House Proposal, the
Senate Proposal or under similar legislation could have an adverse effect on
the general economic condition of Puerto Rico by reducing incentives for
investment in Puerto Rico. Any such adverse effect on the general economy of
Puerto Rico could lead to an increase in mortgage delinquencies and a reduction
in the level of residential construction and demand for mortgage loans. The
elimination of Section 936 could also lead to a decrease in the amount of 936
funds ("936 Funds) invested in Puerto Rico financial assets by 936 Corporations
to the extent that the level of operations and production in Puerto Rico by
such 936 Corporations is decreased over time and therefore increase funding
costs and decrease liquidity in the Puerto Rico financial market. The
magnitude of the impact of any such changes on the Company's profitability or
financial condition cannot be determined at this time. The Company has taken
steps to reduce the impact of any such adverse changes by diversifying its
sources of funding and identifying additional investors for its mortgage
products. During recent periods, the disparity between the cost of 936 Funds
and other sources of funding such as the Euro-dollar market have decreased,
thereby reducing the adverse effect that the loss of such funding could have on
the profitability of the Company.
17
<PAGE> 18
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
In the opinion of the Company's management, the pending and threatened
legal proceedings of which the Company is or would be a party, of which
management is aware, will not have a material adverse effect on the financial
condition of the Company.
ITEM 2 - CHANGES IN SECURITIES
Not Applicable.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5 - OTHER INFORMATION
The Company entered into employment agreements dated as of August 29,
1995 with Salomon Levis, the Chairman of the Board and Chief Executive Officer
of the Company, Zoila Levis, the President of the Company and Richard F.
Bonini, the Senior Executive Vice President of the Company.
Mr. Levis' employment agreement is effective retroactive to January 1,
1995 and terminates on December 31, 1996. Under the terms of the Agreement,
Mr. Levis is entitled to receive annually a base salary of $700,000 plus
incentive compensation equal to the sum of the following: (i) $1.0 million if
the Company earns at least $10.0 million of Adjusted Net Income (as hereinafter
defined); (ii) 10% of the Company's annual consolidated net income after taxes
and after deduction of incentive compensation paid to Salomon Levis, Zoila
Levis and Richard F. Bonini ("Adjusted Net Income"), in excess of $10 million
and up to $20 million to the extent such Adjusted Net Income exceeds an amount
equal to a 15% return on equity; and (iii) 15% of Adjusted Net Income in excess
of $20.0 million to the extent such Adjusted Net Income exceeds an amount equal
to a 15% return an equity. Mr. Levis' annual salary and incentive compensation
is subject to a maximum of $4.5 million per year.
Zoila Levis' employment agreement is effective retroactive to January 1,
1995 and terminates on December 31, 1996. Under the terms of the Agreement,
Zoila Levis is entitled to receive annually a base salary of $300,000 plus
incentive compensation equal to the sum of the following: (i) $300,000 if the
Company earns at least $10.0 million of Adjusted Net Income; (ii) 3% of the
Company's Adjusted Net Income, in excess of $10 million and up to $20 million;
and (iii) 5% of Adjusted Net Income in excess of $20 million to the extent such
Adjusted Net Income exceeds an amount equal to a 15% return an equity. Ms.
Levis' annual salary and incentive compensation is subject to a maximum of
$1.5 million per year.
Richard F. Bonini's employment agreement is effective retroactive to
January 1, 1995 and terminates on June 30, 1997. Under the terms of the
Agreement, Mr. Bonini is entitled to receive annually a base salary of $240,000
plus incentive compensation equal to the sum of the following; (i) $150,000 if
the Company earns at least $10.0 million of Adjusted Net Income; (ii) 3% of the
Company's Adjusted Net Income, in excess of $10 million and up to $20 million
to the extent such Adjusted Net Income exceeds an amount equal to a 15% return
on equity; and (iii) 5% of Adjusted Net Income in excess of $20.0 million to
the extent such Adjusted Net Income exceeds an
18
<PAGE> 19
amount equal to a 15% return an equity. Mr. Bonini's annual salary and
incentive compensation is subject to a maximum of $1.2 million per year.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.32 - Warehousing Loan Agreement, dated September 8, 1995,
between FFCC and Banco Santander
10.35 - Employment Agreement, dated as of August 29, 1995,
between FFCC and Salomon Levis
10.36 - Employment Agreement, dated as of August 29, 1995,
between FFCC and Zoila Levis
10.43 - Employment Agreement, dated as of August 29, 1995,
between FFCC and Richard F. Bonini
10.62 - Debenture Purchase Agreement dated as of September 25,
1995, between FFCC and BanPonce Corporation (including
Form of Debenture)1
10.63 - Financing Agreement dated October 10, 1995 between FFCC
and Banco Santander together with related Assignment and
Pledge Agreements.
27 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
1. Current Report on Form 8-K, dated September 22, 1995,
reporting under Item 5 "Other Events", agreement in principle
to enter into Debenture Purchase Agreement with BanPonce
Corporation
2. Current Report on Form 8-K, dated September 27, 1995,
reporting under Item 5 "Other Events" the execution of a
Debenture Purchase Agreement with BanPonce Corporation.
- -------------------------
(1) Incorporated by reference to same exhibit number of FFCC's Current
Report on Form 8-K dated September 27, 1995.
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST FINANCIAL CARIBBEAN CORPORATION
(Registrant)
Date: October 31, 1995 /s/ Salomon Levis
-------------------------------------
Salomon Levis
Chairman of the Board
and Chief Executive Officer
Date: October 31, 1995 /s/ Richard F. Bonini
-------------------------------------
Richard F. Bonini
Senior Executive Vice President
and Secretary
Date: October 31, 1995 /s/ Luis Alvarado
-------------------------------------
Luis Alvarado
Executive Vice President and
Chief Financial Officer
20
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
<S> <C> <C>
10.32 - Warehousing Loan Agreement, dated September 8,
1995, between FFCC and Banco Santander
10.35 - Employment Agreement, dated August 29, 1995,
between FFCC and Salomon Levis
10.36 - Employment Agreement, dated August 29, 1995,
between FFCC and Zoila Levis
10.43 - Employment Agreement, dated August 29, 1995,
between FFCC and Richard F. Bonini
10.62 - Debenture Purchase Agreement dated as of September
25, 1995, between FFCC and BanPonce Corporation
(including Form of Debenture(1)
10.63 - Financing Agreement dated October 10, 1995
between FFCC and Banco Santander together with
related Assignment and Pledge Agreements.
27 - Financial Data Schedule (for SEC use only)
</TABLE>
- ------------------------------
(1) Incorporated by reference to same exhibit number of FFCC's Current
Report on Form 8-K dated September 27, 1995.
<PAGE> 1
EXHIBIT 10.32
WAREHOUSING LOAN AGREEMENT
Made this 8th day of September, 1995 between BANCO SANTANDER PUERTO
RICO, a banking corporation hereinafter referred to as "LENDER", and FIRST
FINANCIAL CARIBBEAN CORPORATION, a corporation organized under the laws of the
Commonwealth of Puerto Rico, hereinafter called the "BORROWER".
WITNESSETH:
WHEREAS, the BORROWER has applied to the LENDER for a mortgage
warehousing line of credit, hereinafter referred to as the "LOAN" and as
collateral security for the repayment of such LOAN with interest, the BORROWER
has agreed to pledge to the LENDER first mortgage promissory notes and
mortgages, secured or guaranteed by the Federal Housing Administration (FHA),
by the Veterans Administration (VA) and/or conventional mortgages, all of
which must be acceptable to Lender, and for which BORROWER has a firm purchase
commitment acceptable to LENDER, and
WHEREAS, the LENDER desires to grant such loans to the BORROWER upon
the terms hereinafter set forth.
NOW THEREFORE, in consideration of the premises, and the mutual
covenants, agreements and conditions herein contained, the LENDER hereby
accepts the loan application of the BORROWER and agrees to make such loan
subject to the following:
TERMS AND CONDITIONS
ARTICLE ONE: REPRESENTATIONS AND WARRANTIES
As an inducement to LENDER to make the LOAN to BORROWER, BORROWER
covenants with, represents and warrants, except as provided in Schedule I
herein, that:
<PAGE> 2
2
1.1 CORPORATE EXISTENCE AND POWER: The Borrower is and
will continue to be a corporation duly organized and existing and in
good standing under the laws of the Commonwealth of Puerto Rico, that
being the only jurisdiction in which it owns real property or conducts
business or proposes to do so, and it has all requisite power to own
its properties and to carry on its business as now conducted and as
proposed to be conducted or carried on.
1.2 CORPORATE AUTHORITY. The BORROWER has corporate power
and authority to execute, deliver and carry out this agreement and the
Notes to be issued hereunder and to pledge the collateral each of
which instruments has been duly authorized by all necessary corporate
action on its parts.
1.3 LITIGATIONS AND COMPLIANCE WITH LAWS. There are no
actions, suits or proceedings pending, or to the knowledge of the
BORROWER before any court or any governmental department or agency
which may result in any material adverse change in the business or
condition of the BORROWER; to the best of the knowledge of the
BORROWER, it has complied with all applicable statutes and regulations
of all governmental authorities having jurisdiction over it, and it is
not in default with respect to any order, writ, injunction or decree
of any court or governmental agency; there are not to the best of the
knowledge of the BORROWER, any claims involving the BORROWER except
immaterial claims arising in the ordinary course of business;
<PAGE> 3
3
and the BORROWER has good and marketable dominion title to its
respective properties and assets.
1.4 COMPLIANCE WITH AGREEMENTS. The BORROWER is not a
party to any contract or agreement or subject to any charter or other
corporate or other legal restriction of any kind which, in the opinion
of the BORROWER, materially and adversely affects the businesses,
properties, assets or conditions, financial or otherwise, of the
BORROWER; and neither the execution and delivery of this agreement,
the consummation of the transaction contemplated herein, nor the
compliance with the terms, conditions and provisions of this agreement
and of the note will conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under the charter
or bylaws of the BORROWER or any agreement or other instrument to
which the BORROWER is a party or by which it is bound or result in the
creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of the properties or assets of the BORROWER
except as permitted by the provisions hereof.
1.5 CONDUCT OF BUSINESS: The BORROWER possesses and will
possess at all times during the effective date of this Agreement all
franchises and rights necessary for the conduct of its businesses as
now; or, hereafter proposed to be conducted, without substantial known
conflict with the rights of others.
<PAGE> 4
4
ARTICLE TWO: THE LOAN
2.1 The BORROWER agrees to borrow from LENDER, and
LENDER, subject to all of the terms and conditions of this Agreement,
agrees to lend to BORROWER up to the total aggregate principal sum of
THIRTY MILLION DOLLARS ($30,000,000.00) or to make one or more
advances on account of such LOAN, from time to time from date of this
agreement. From said amount of THIRTY MILLION DOLLARS ($30,000,000.00)
the BORROWER is authorized to use the sum of FIVE MILLION DOLLARS
($5,000,000.00) for non-conforming first conventional mortgages. The
BORROWER shall repay the loans for FHA and VA mortgages to the LENDER,
its successors or assigns not later than One Hundred Eighty (180) days
from date of each advance and the loans for conventional mortgages
conforming and non-conforming not later than ninety (90) days from
date of each advance, with interest at a fluctuating annual rate
equivalent to One Hundred Fifty (150) basis points floating in excess
of the net cost to Lender of Eligible Funds as this term is defined in
Regulation 5105 issued by the Commissioner of Financial Institutions,
computed on the basis of the actual number of days elapsed over a year
of 360 days, provided said funds are available at Banco Santander
Puerto Rico, and provided further that the use of the funds by
Borrower are considered eligible activity ("activated elegible")under
the then prevailing regulations. Net cost to Lender will be determined
and adjusted every ninety (90) days. In the event that Eligible Funds
are not available at Banco Santander Puerto
<PAGE> 5
5
Rico or in the event that the use of funds by Borrower are not
considered eligible activity ("activated elegible") under the then
prevailing regulations, the annual rate of interest on the advances to
be made by Lender to Borrower shall then be the Prime Rate of interest
established from time to time by Citibank, N.A. in the city of New
York. The Lender will notify the Borrower if Eligible Funds are not
available prior to the adjustment of the interest rate as indicated
above. So long as the applicable rate of interest is based on the net
cost to LENDER of Eligible Funds, LENDER shall give written notice to
BORROWER of the applicable rate of interest on or before the fifth
(5th) day of the corresponding month. Notwithstanding the hereinbefore
stated rate of interest payable hereunder, interest at the rate of Two
point Twenty Five Percent (2.25%) per annum will be paid on the
portion of the principal outstanding balance of the Loan, which shall
be equal to the average monthly balance of the Loan, which shall be
equal to the average monthly balance of certain non-interest bearing
escrow accounts maintained by Borrower with Lender. Interest shall be
payable on the fifth day of each month on so much funds as may have
been advanced and remain unpaid, on a basis of years of 360 days.
Wherever in this agreement reference is made to the LOAN, it
shall be deemed to mean a sum equal to the aggregate of the following:
1. All sums disbursed by the LENDER to the BORROWER
under the mortgage warehousing line of credit authorized
hereunder;
<PAGE> 6
6
2. Accrued interest on such disbursements to the date of
their repayment; and
3. All sums representing expenditures hereafter made or
incurred by the LENDER under the powers conferred upon it by
the provisions of this agreement together with interest
thereon at a rate as hereinbefore indicated from the date of
each such payment to and including the date of their
repayment.
2.2 THE NOTE. BORROWER shall make, execute and deliver to
LENDER its Note or Notes, hereafter referred to as the "NOTE", or
"NOTES", substantially in the form of Exhibit "A" annexed hereto dated
the date of the disbursements and payable with interest as set forth
therein maturing on or before One Hundred Eighty (180) days from its
issue date in the case of FHA and VA mortgages, and ninety (90) days
in all other cases. If any principal of the NOTES is not paid on due
date, interest shall accrue and be payable thereon after such due date
at the rate indicated. Provided, however that regardless of any
statement to the contrary herein or in any other document or
instrument, all advances shall be due and payable together with
interest, without demand or notice, within a period of not more than
One Hundred Eighty (180) days from the date each advance is made, in
the case of FHA and VA mortgages, and ninety (90) days in all other
cases.
2.3 The advances made for VA, FHA and conventional
conforming mortgages shall not exceed
<PAGE> 7
7
Ninety Five Percent (95%) of the face amount of the mortgage or
mortgages pledged; the advances for conventional non-conforming
mortgages shall not exceed Eighty Percent (80%) of the mortgage or
mortgages pledged.
ARTICLE THREE: COLLATERAL SECURITY
3.1 As Collateral Security for the repayment of such loan
with interest by the BORROWER to the LENDER and for the performance by
the BORROWER of all the terms of this agreement, the BORROWER shall
execute, acknowledge and deliver to the LENDER, one or more pledge
agreements substantially in the form of Exhibit "B" annexed hereto and
simultaneously deliver to LENDER Federal Housing Administration or
Veterans Administration first mortgage promissory notes and mortgages
on real estate improved by a completed one-family dwelling, together
with their corresponding complementary documents listed and set forth
in Exhibit "C" hereof, or conventional first mortgages as indicated in
Article 2.3 above.
3.2 BORROWER covenants that the instruments creating
LENDER'S security interest in the Collateral shall be in a form
satisfactory to LENDER, in the LENDER'S absolute discretion and that
it shall make, execute and/or deliver from time to time all necessary
instruments as may be necessary or convenient to perfect the LENDER'S
security interest in the Collateral.
3.3 So long as such loans or any part thereof, together
with interest thereon, shall
<PAGE> 8
8
remain unpaid, the LENDER shall have all the rights of an
unconditional owner of such mortgage promissory notes and mortgages,
including but without limitation, the following:
(a) The right to declare the entire principal sum of such
mortgage promissory notes and mortgages immediately
due and payable in the event of a default on the part
of any owner of the mortgaged premises in any of the
terms of such mortgage promissory notes and
mortgages. BORROWER is allowed to cure default by
replacing such mortgage or mortgages with others
acceptable to LENDER.
(b) The right to receive the principal sum of such
mortgage promissory notes and mortgages or any part
thereof, and upon receipt of the unpaid balance of
the principal sum with interest, to execute and
acknowledge in its own name and deliver a
satisfaction of such mortgage promissory notes and
mortgages or an assignment thereof in form to be
recorded, and to retain for its own use the sums so
received by it and to apply such sums on account of
such loan and interest;
<PAGE> 9
9
(c) The right to collect all interest thereon which may
become due and payable, and to apply such interest on
account of the interest due and payable, and to apply
such interest on account of the interest due or
hereafter to become due to the LENDER from the
BORROWER shall not be entitled to any abatement of
interest by reason of any sums collected by the
LENDER as interest on such mortgage promissory notes
and mortgages in advance of the date upon which
interest shall become due and payable to the LENDER
from the BORROWER on account of such loan;
(d) The right in case of default under the terms of such
mortgage promissory notes and mortgages by any owner
of the mortgaged premises, to institute, prosecute to
judgement, settle, or discontinue any proceeding at
law or in equity to enforce the collection of the
mortgage debt, and to foreclose such mortgage, and
the BORROWER shall indemnify the LENDER
<PAGE> 10
10
against any loss not covered by the mortgage
insurance extended by F.H.A. or V.A. as the case
might by, which it may sustain by reason of any
expense for legal services or otherwise in
connection with such proceedings, and shall pay
interest thereon at the rate hereinbefore stated;
provided, however, that after deduction for the
amount of any legal and other expenses necessarily
incurred in connection with such foreclosure
proceedings, together with interest thereon as
aforesaid, the proceeds of sale realized upon such
foreclosure of the mortgaged premises shall be
applied in reduction of the principal sum of such
loan, with interest as at the date of receipt of such
proceeds by the LENDER from F.H.A./V.A. insurance or
otherwise; and the BORROWER shall pay any balance
owing on such loan, with interest, within ten days
after the foreclosure sale; upon such foreclosure
sale, the LENDER may purchase the mortgaged premises
at the best price obtainable without being liable
<PAGE> 11
11
to account to the BORROWER by reason thereof;
(e) The right, in the event that any owner of the
mortgaged premises fails to keep the buildings
thereon insured against loss by fire for the benefit
of the holders of all mortgages on such premises, or
fails to pay any tax, or assessment which may be or
become a lien thereon, to pay the premiums on such
insurance policies to the full insurable value of
such buildings, and to pay all such taxes, or
assessments together with any interest or penalties
due thereon; and the amount so paid, with interest on
such payment, at the rate stipulated for the loan,
shall be added to the indebtedness of the BORROWER to
the LENDER, and the BORROWER shall repay such amounts
on demand.
3.4 BORROWER will continue to be an F.H.A. approved
mortgagee and will retain its right to obtain guaranties of mortgage
loans from V.A.
3.5 At any time or times BORROWER will, upon request of
LENDER, execute and deliver to LENDER any and all such additional
documents as in the
<PAGE> 12
12
opinion of LENDER, or its attorneys, may be reasonably and fully
necessary to effectuate the purpose of this Agreement.
3.6 BORROWER represents and covenants that nothing has
been done or omitted nor will BORROWER do or omit, or permit anything
to be done or omitted, the effect of which act or omission would
operate to impair or invalidate the F.H.A. insurance or V.A. guaranty
of any mortgage covered hereunder.
3.7 LENDER or any representative designated by LENDER,
shall at all reasonable times be permitted to inspect BORROWER'S books
and any documents related to the loans hereunder and to take therefrom
such abstracts as LENDER or its representative may deem advisable.
3.8 BORROWER will pay all fees, and expenses in
connection with recording of all mortgages pledged hereunder and of
assignments hereof to and reassignments thereof by LENDER or its
nominee.
3.9 The BORROWER will furnish to the LENDER not later
that sixty (60) days following the end of each quarterly accounting
period, quarterly statements reflecting the financial condition of the
BORROWER as of the date thereof signed by the chief financial officer
of the BORROWER and, no later than ninety (90) days after the end of
each fiscal year of the BORROWER, annual audited financial statements
of the BORROWER certified public accountants acceptable to the LENDER.
<PAGE> 13
13
ARTICLE FOUR: CONDITIONS PRECEDENT TO
THE DISBURSEMENT OF THE LOAN:
4.1 The obligation of the LENDER to make disbursements
hereunder is subject to the accuracy of all representations and
warranties herein contained, to the performance by the BORROWER of its
agreements to be performed hereunder on or before the date of each
disbursement and to the satisfaction of the following further
conditions:
(a) The representations and warranties contained in
Article One hereof shall be true and correct on and
as of the date of each disbursement hereunder with
the same effect as though such representations and
warranties had been made on and as of such date; and
on each such date, no event of default specified in
Article Five hereof and no condition, event, or act
which, with the giving of notice or the lapse of time
or both, would constitute such an event of default,
shall have occurred and be continuing or shall exist.
(b) The BORROWER shall have, executed and delivered to
the LENDER its NOTE substantially in the form of
Exhibit "A" annexed hereto, dated the date of the
issuance thereof, and
<PAGE> 14
14
payable as hereinbefore indicated with interest
payments monthly as set forth therein.
(c) As security for the payment of the LOAN and of each
and every advance by the LENDER hereunder, BORROWER
shall simultaneously with the issuance of NOTE,
evidencing the LOAN or the initial advance
thereunder, execute and deliver to the LENDER a
Pledge Agreement in the form annexed as Exhibit "B"
and shall deliver or cause to be delivered to the
LENDER the Collateral and other documents required
herein.
(d) The BORROWER shall have delivered to the LENDER a
Certificate(s) signed by the Secretary or an
Assistant Secretary of the BORROWER, dated the
closing date, certifying to the adoption by the Board
of Directors of BORROWER of Resolutions authorizing
the borrowing from LENDER provided herein the
execution and delivery of this agreement, the NOTE or
NOTES and the Pledge Agreements, the assignment,
pledge and delivery
<PAGE> 15
15
to the LENDER of the Collateral, and the execution
and delivery by the BORROWER of all other documents,
papers, and instruments as herein required, or which
may be required by the LENDER or its counsel.
(e) BORROWER shall certify that no event of default
specified in Article Five shall have occurred.
ARTICLE FIVE: EVENTS OF DEFAULT:
If one or more of the following described Event of Default shall
occur, that is to say:
5.1 DEFAULT ON THE LOAN: The BORROWER shall default in
the payment of the principal or interest on the Notes when due and the
LENDER'S commitment to continue making disbursement hereunder shall
thereupon terminate. The LENDER shall then have the right to acquire
and retain absolute title to the mortgage promissory notes and
mortgages pledged to it pursuant to the terms of this agreement.
BORROWER agrees that if the LOAN is foreclosed, all mortgages
comprising the collateral used as security for this warehousing loan,
shall be transferred forthwith by BORROWER to LENDER for its absolute
control and the LENDER will continue to service said mortgages without
incurring any fees, cost or expense for the transfer of such servicing
to the LENDER, for all of which fees, costs and
<PAGE> 16
16
expenses BORROWER hereby agrees to indemnify and hold the LENDER
harmless from.
5.2 INSOLVENCY: The BORROWER shall become insolvent or
unable to pay its debts as they mature, or shall file a voluntary
petition in bankruptcy or a voluntary petition seeking reorganization,
or to effect a plan or other arrangement with creditors, or shall file
an answer consenting to or take any other action indicating
acquiescence in an involuntary petition pursuant to or purporting to
be pursuant to any bankruptcy, reorganization or insolvency law of any
jurisdiction, or shall make an assignment for the benefit of creditors
or to an agent (authorized to liquidate any substantial amount of its
assets) or shall apply for or consent to the appointment of any
receiver or trustee for it or for a substantial part of its property.
5.3 RECEIVERSHIP. An order shall be entered and shall not
be dismissed or stayed within thirty (30) days from the filing of a
petition therefor, its entry being pursuant to or purporting to be
pursuant to any bankruptcy, reorganization or insolvency law of any
jurisdiction approving an involuntary petition seeking reorganization
of, or to effect a plan or other arrangement with creditors of the
BORROWER, or appointing any receiver or trustee for the BORROWER or
for a substantial part of the property of the BORROWER.
5.4 MISREPRESENTATIONS. Any representation, covenant or
warranty herein made by the BORROWER,
<PAGE> 17
17
or any certificate or statement furnished pursuant to the provisions
of this Agreement, shall prove to have been false or misleading in any
material respect as of the time made.
5.5 LACK OF PERFORMANCE. The BORROWER shall default in
the performance of any other covenant, condition, or provision
thereof, or the BORROWER shall default in the performance of any other
obligation which may exist between it and the LENDER either on the
date hereof or in the future, and such default shall not be remedied
within a period of thirty (30) days after written notice thereof to
the BORROWER from the LENDER.
5.6 JUDGMENTS. The rendering of a judgment for the
payment of money against BORROWER and any such judgment shall remain
unsatisfied and in effect for any period of sixty (60) consecutive
days without a stay of execution, then and in any such event, the
Notes outstanding hereunder and interest accrued thereon, and all
liabilities of the BORROWER hereunder, shall become forthwith due and
payable without presentment, demand, protest, or notice of any kind,
all of which are hereby expressly waived.
ARTICLE SIX: RETURN OF THE COLLATERAL
6.1 If all the terms of this agreement are fully
performed by the BORROWER, and upon the receipt by the LENDER of the
entire principal sum of such warehousing loans together with interest
thereon, the LENDER shall return to the BORROWER the Collateral
without recourse.
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ARTICLE SEVEN. MISCELLANEOUS
7.1 NO WAIVER. No delay or failure of the LENDER, or the
holder of any Note in exercising any right, power and privilege
hereunder shall affect such right, power of privilege; nor shall any
single or partial exercise thereof or any abandonment or
discontinuance of steps to enforce such a right, power or privilege
preclude any further exercise thereof or of any other right, power or
privilege. The rights and remedies of the LENDER hereunder are
cumulative and not exclusive of any rights or remedies which it would
otherwise have. Any waiver, permit, consent or approval or any kind or
character on the part of the LENDER of any breach or default under
this agreement or any waiver on the part of any party hereto of any
provision or condition of this agreement, must be in writing and shall
be effective only to the extent in such writing specifically set
forth. In the event of any action at law or suit in equity in relation
to this agreement or the NOTES, the BORROWER, in addition to all other
sums which the BORROWER may be required to pay, will pay a liquidated
sum equal to Ten Percent (10%) of the then outstanding balance of this
loan for attorney's fees. Nothing in this agreement shall be deemed
any waiver or prohibition of the LENDER'S right of banker's lien, or
set off.
7.2 SURVIVAL OF COVENANTS; NOTICE. All representations,
warranties, covenants and agreements of the BORROWER contained herein
or otherwise in writing shall survive the making of
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loans hereunder and the issuance of any Note. All notices, statements,
requests, and demands given to or made upon any party hereto in
accordance with the provisions of this agreement shall be deemed to
have been given or made when deposited in the certified mail, postage
prepaid, or in the case of telegraphic notice, when delivered to the
telegraph company, charges, prepaid, addressed to such party as the
address or addresses written below its signature hereto, or in
accordance with any unrevoked written direction from such party to the
other parties hereto, except in cases where it is expressly provided
that such notice, request or demand shall not be effective until
received by the party to whom it is addressed.
7.3 OUT OF POCKET EXPENSE. The BORROWER agrees to pay and
save the LENDER harmless against liability for the payment of all out
of pocket expenses of the LENDER arising in connection with this
transaction, including the reasonable fees and expenses of counsel for
the LENDER. The LENDER may deduct from any disbursement to be made
under this agreement any amount necessary for the payment of any fees
and expenses relation to examinations of title, including costs of
surveys, charges or appraisals, inspections, drawings of paper,
mortgage recording fees, revenue stamps, if any, and architect's
engineer's and legal and notarial fees, and any expenses incurred in
the procuring or the making of this loan, and in the payment of any
insurance premiums, mortgages, taxes, assessments and other charges,
liens and encumbrances upon any of the properties that are mortgaged
or encumbered
<PAGE> 20
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as security for the collateral, whether before or after making of this
loan and any other amounts necessary for the protection of said
collateral, and appraise such amount in making said payment and all
sums so applied shall be deemed advances under this agreement and
secured by the collateral.
7.4 SUCCESSORS AND ASSIGNS. All of the terms of this
agreement shall be binding upon the successors, and assigns of
BORROWER or any such successor or assign, and shall inure to the
benefit of and be enforceable by the LENDER and its successors and
assigns and any holder or holders of the NOTE(S) evidencing the
advances made by the LENDER hereunder.
7.5 GENDER AND HEADINGS. Where the context so requires,
the singular shall include the plural and the plural the singular and
the use of any gender shall include the masculine, the feminine and
the neuter gender. The headings in this agreement are for purposes of
references only and shall not limit or otherwise affect any of the
terms hereof.
7.6 APPLICABLE LAW. The provisions of this contract shall
be interpreted and applied in accordance with the laws of the
Commonwealth of Puerto Rico. This agreement constitutes the entire
agreement among the parties pertaining to the subject matter hereof
and subsides all prior and contemporaneous agreements and
understandings of the parties in connection therewith. No covenant or
condition not expressed in this agreement shall
<PAGE> 21
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affect or be effective to interpret, change or restrict this
agreement. No change, termination or attempted waiver of any of the
provisions hereof shall be binding unless in writing.
7.7 No mortgage shall be eligible for pledge hereunder,
unless it complies with the following terms and conditions:
(a) The mortgage when delivered in pledge hereunder
complies with all requirements of Exhibit "C" annexed
hereto and is accompanied by all other instruments
and documents required by said Exhibit "C".
(b) The original principal amount of any mortgage pledged
hereunder shall at the time of pledge in no event
exceed any limitation prescribed by the Permanent
Lender, FHA or VA
(c) It shall not be in default.
(d) All FHA, VA or Conventional Mortgages shall
constitute a valid first lien on premises improved by
a completed one family dwelling in recordable form.
(e) No mortgage shall be pledged pursuant to this
Agreement if any officer, stockholder or director of
BORROWER, under whatever terms may be used for such
relationships, or any
<PAGE> 22
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affiliated, or subsidiary corporation of BORROWER,
shall own any interest in the mortgaged property or
shall have any direct or contingent obligation for
payment of the mortgage, either collaterally or
otherwise.
(f) It is has theretofore been pledged with LENDER or any
other lender under any other agreement.
(g) It shall secure a note of the owner of the property
(1) naming BORROWER as obligee without any
intervening assignment,
(2) bearing interest at the maximum rate
permitted for such note by the rules and regulations
of the Federal Housing Administration (FHA) Veterans
Administration (VA) or the laws of the Commonwealth
of Puerto Rico as the case may be.
(3) having a maturity of not more than the
maximum period of time, at the time, permitted by law
of rules and regulations applicable to FHA or VA
mortgages, as the case may be.
(4) dated up to one hundred twenty (120) days
prior to the date it is delivered in pledge to
LENDER. LENDER may accept Mortgages dated up to two
years prior to the date they are delivered in pledge
to LENDER, subject to the following conditions: (i)
only FHA, VA and conventional conforming mortgages
will be accepted, (ii) the total aggregate loans for
such mortgages will not exceed the sum of four
million dollars ($4,000,000.00), and (iii) requests
for advances on
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such mortgages will be based on the principal
outstanding balance of the respective Mortgage Notes,
and will be accompanied by Payment History Reports of
the Mortgage Notes for the last 12 months preceding
the date of pledge, evidencing satisfactory payment
histories and that the Mortgage Notes are current.
LENDER reserve the right not to make advances on mortgages
that fails to comply with the standards hereinbefore established.
7.8 At any time after the date of pledging a mortgage
hereunder BORROWER may pay to LENDER the amount of the advance in
respect to such mortgage and interest accrued thereon, and withdraw
such mortgage and the instruments and documents relating thereto from
pledge hereunder.
If at any time LENDER shall notify BORROWER that, in the sole
judgment of LENDER, any pledged mortgage, or any instrument or
document relating thereto, is unsatisfactory collateral for the loan
hereunder, whether because of failure of the mortgage or any
instruments or documents relating thereto to conform to the
requirements of this Agreement or for failure to comply with any
applicable legal requirements, and shall demand that BORROWER withdraw
said mortgage, BORROWER, will, within seven (7) days after such
demand, pay to LENDER the amount of the advance in respect to such
mortgage and interests accrued thereon and withdraw such mortgage and
the instruments and documents relating thereto from pledge hereunder
and in defect thereof the LENDER may charge said amount to BORROWER'S
account with the LENDER.
<PAGE> 24
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If, in the case of any mortgage pledged hereunder:
(1) such mortgage shall remain in pledge hereunder beyond
the expiration date of the firm commitment for its purchase,
or beyond the expiration of One Hundred Eighty (180) days for
FHA and VA mortgages; and Ninety (90) days for conventional
mortgages, from the date it was pledged, whichever first
occurs, or
(2) any default (as defined in the mortgage and/or
applicable rules and regulations of FHA or VA, as the case may
be) under such mortgage shall occur and continue for a period
in excess of sixty (60) days, or
(3) the FHA insurance endorsement or the VA loan guaranty
certificate relating to such mortgage shall not have been
obtained and delivered to LENDER within forty five days after
the pledge of such mortgage. Borrower shall forthwith pay to
LENDER, the amount of the advance in respect to such mortgage,
and accrued interest thereon, and withdraw such mortgage and
the instruments and documents relating thereto from pledge
hereunder and in defect thereof the LENDER may charge said
amount to BORROWER'S account with the LENDER.
Notwithstanding any of the foregoing, the BORROWER may, in
lieu of paying the advance with respect to the unsatisfactory or
defaulted mortgage, substitute and pledge to the LENDER additional
mortgage(s) eligible for pledge hereunder in the aggregate principal
amount equal to or greater than the principal amount of the mortgage
required to be withdrawn from pledge.
7.9 SALE TO PERMANENT INVESTOR. LENDER will be under no
obligation to return to BORROWER the collateral given as security for
the payment of the disbursements made by LENDER to BORROWER under this
Warehousing Loan Agreement until all the disbursements made by
BORROWER to LENDER pertaining to such collateral, plus interest
thereon has been
<PAGE> 25
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fully satisfied.
All collateral that will be used for a GNMA or FNMA pool or
that is to be sold to permanent investors will be maintained in the
custody of Lender's Trust Department where the initial certification,
custody and final certification will be performed or will be processed
as follows:
There are three options for processing the withdrawal of
collateral for certifications:
1. By establishing a custodial relationship with the
Trust Department; wherein the initial certification, custody and final
certifications will be performed and maintained; delivery of the
issued GNMA or FNMA certificate will be performed in the name of
Lender or any other party acceptable to Lender. Lender will, upon
payment, deliver said certificate endorsed with signature guarantee to
the Borrower;
2. By establishing a custodial relationship with a
principal financial institution in Puerto Rico, other than Banco
Santander Puerto Rico, which is acceptable to Banco Santander Puerto
Rico, that will receive the collateral withdrawn from the custody of
Banco Santander Puerto Rico and who is willing and able to grant Banco
Santander Puerto Rico a receipt pursuant to which the custodial bank
will be responsible of the collateral delivered to it, will issue a
trust receipt, properly executed, and pursuant to which said custodial
bank will assume responsibility for the collateral and will make
arrangements for the timely payment to the LENDER of the amounts owed
therefrom in a period of twenty (20) working days from the date of
delivery of the collateral to the BORROWER and in the event
<PAGE> 26
26
that such payment is not timely received, LENDER may, at its option,
charge the same to the BORROWER and BORROWER shall forthwith pay the
same to the LENDER through the client's warehousing line of credit.
The BORROWER may use a book entry system which entails no
further physical transfer of the collateral under the two foregoing
options.
3. In the case of sales to the Fannie Mae Cash Window
Program, by accompanying a Trust Receipt issued by Borrower in form
and substance acceptable to the Lender, identifying its purpose of
sale to the Fannie Mae Cash Window Program, along with documents
evidencing the commitment to purchase the Mortgages, such as the
Fannie Mae Purchase Commitment. The Trust Receipts issued hereunder
will not exceed a period of five (5) business days, and the aggregate
amount of outstanding Trust Receipts shall not exceed Three Million
Dollars ($3,000,000.00).
4. By paying all the amounts owed under the warehousing
line of credit related to the particular advances for which the
collateral is requested to be withdrawn for certification.
7.10 LENDING PERIOD. All terms and conditions of this
agreement will remain in effect until JUNE 30, 1996, unless sooner
terminated in accordance with the terms and conditions hereinbefore
set forth, or extended for an additional period or periods by mutual
agreement between the parties hereto.
<PAGE> 27
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7.11 RECORD KEEPING. BORROWER shall maintain a complete
record in connection with each mortgage which is pledged to LENDER
pursuant to the provisions of this agreement and all complementary
documents necessary to sell the mortgage to the investors. Each and
all such records and documents shall be considered to be part of
LENDER'S collateral security as long as the mortgage to which it
relates shall remain pledged and such records and documents shall be
delivered to LENDER at any time upon demand.
7.12 EFFECTIVE DATE. This agreement shall become effective
when signed by both parties hereto.
7.13 COMPLIANCE WITH REGULATION 5105. In the event that
any mortgage note given by Borrower to Lender as collateral security
under this agreement is subject to Section 6.2.4(b) (vi) B of
Regulation 5105 (Reglamento de Instituciones Elegibles) published by
the Commissioner of Financial Institutions of the Commonwealth of
Puerto Rico, as amended, Borrower will also comply with the Provisions
of Section 6.4.3(d) of said Regulation.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to
be signed by their duly authorized officers, at San Juan, Puerto Rico on the
date first above stated.
BANCO SANTANDER PUERTO RICO FIRST FINANCIAL CARIBBEAN
CORPORATION
/s/ Eli Belendez Soltero /s/ Mario S. Levis
/s/ Hector Horta Merly
Affidavit Number 24,184 (Copy). Subscribed and acknowledged to
<PAGE> 28
28
before me by Mario S. Levis, as Authorized Agent of First Financial Caribbean
Corporation, of legal age, single and resident of San Juan, Puerto Rico, and by
Eli Belendez Soltero and Hector Horta Merly, as Authorized Agents of Banco
Santander Puerto Rico, both of legal age, single and married, respectively and
residents of Guaynabo and San Juan, Puerto Rico, respectively, personally known
to me at San Juan, Puerto Rico, this 8th day of September, 1995.
[SEAL] NOTARY PUBLIC
<PAGE> 1
EXHIBIT 10.35
FIRST FINANCIAL CARIBBEAN CORPORATION
1159 F.D. Roosevelt Avenue
Puerto Nuevo, Puerto Rico 00920
As of August 29, 1995
Mr. Salomon Levis
650 Munoz Rivera Avenue
Hato Rey, Puerto Rico 00918
Dear Mr. Levis:
You were previously employed pursuant to an Agreement (the "Prior
Employment Agreement") dated January 1, 1992 by First Financial Caribbean
Corporation, a Puerto Rico corporation ("FFCC"). You have had wide experience
during your employment by FFCC in the mortgage banking business, have been
employed by FFCC or its predecessors since 1983, and have served as Chairman of
the Board of Directors and Chief Executive Officer of FFCC since February 1,
1990. Because of your experience, FFCC deems it in its best interests to
continue to have the benefit of your services as Chairman of the Board and
Chief Executive Officer.
It is expected that in such capacity, in addition to your duties as
Chairman and Chief Executive Officer of FFCC you will continue to manage the
business of FFCC substantially in the manner in which you have prior to the
date hereof. The Board of Directors of FFCC has authorized the execution of
this Agreement with regard to your employment on the conditions outlined in the
following sections of this letter. This Agreement supersedes and cancels all
prior employment, personal service, consulting or similar agreement between you
and FFCC and its subsidiaries, divisions and ventures, including the Prior
Employment Agreement.
1. TERM OF EMPLOYMENT
The term of this Agreement shall be for a period commencing
retroactively to January 1, 1995 and ending December 31, 1996, unless sooner
terminated as herein provided.
2. POSITION AND RESPONSIBILITIES
You will serve as Chairman and Chief Executive Officer of
FFCC. By your acceptance of this Agreement, you undertake to accept such
employment and to devote your full time and attention to FFCC, and to use your
best efforts, ability and fidelity in the performance of the duties attaching
to such employment. During the term of your employment hereunder, you shall
not perform any services for any other company, which services conflict in any
way with your obligations under the two preceding sentences of this Section 2,
whether or not such company is competitive with the businesses of FFCC,
provided, however, that nothing in this Agreement shall preclude you from
devoting reasonable periods required for
<PAGE> 2
Mr. Salomon Levis
As of August 29, 1995
Page 2
(i) serving as a director or member of a committee of any
organization involving no conflict or potential conflict of interest with the
interests of FFCC;
(ii) delivering lectures, fulfilling speaking engagements,
teaching at educational institutions;
(iii) engaging in charitable and community activities; and
(iv) managing your personal and family investments,
provided that such activities do not interfere with the regular performance of
your duties and responsibilities under this Agreement.
You shall, at all times during the term hereof, be subject to
the supervision and direction of the Board of Directors of FFCC with respect to
your duties, responsibilities and the exercise of your powers.
3. COMPENSATION
(a) During the term of this Agreement you shall receive
an annual salary of $700,000 annually, payable no less often than monthly in
accordance with corporate policy.
(b) (i) During the term of this Agreement, you shall
also be entitled to receive an annual incentive bonus equal to the sum of the
following:
(1) $1,000,000 if FFCC earns $10.0
million of Adjusted Net Income (as hereinafter
defined);
(2) 10% of Adjusted Net Income in excess
of $10.0 million and up to $20.0 million to the
extent such Adjusted Net Income exceeds an amount
equal to a 15% Return on Equity Capital (as
hereinafter defined); and
(3) 15% of Adjusted Net Income in excess
of $20.0 million to the extent such Adjusted Net
Income exceeds an amount equal to a 15% Return on
Equity Capital;
provided, however, that total salary and incentive compensation payable to you
pursuant to this Agreement shall not exceed $4.5 million per annum.
(ii) The incentive bonus shall be payable annually
by FFCC within 30 days following the date on which its Annual Report on Form
10-K for the fiscal year ended the prior December 31 shall have been filed with
the United States Securities and Exchange Commission; provided that such amount
shall only be payable if you shall have served as Chairman of the Board and
Chief Executive Officer to FFCC pursuant to this Agreement for the entire
fiscal year to which such payments relate. As used in this Section 3,
"Adjusted Net Income" means the annual consolidated net income by FFCC and its
subsidiaries after all taxes (including net income from equity interests held
by FFCC in any other venture and net income of any successor of FFCC which may
be formed by merger, consolidation or sale of
<PAGE> 3
Mr. Salomon Levis
As of August 29, 1995
Page 3
substantially all of the assets of FFCC) during the calendar year preceding the
payment as determined in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved and as
shown by FFCC's published consolidated financial statements audited by its
independent accountants (hereinafter referred to as "GAAP"), such net income to
be adjusted (A) by reducing from such net income any payments made pursuant to
Section 3(b)(i) hereof and payments of similar incentive compensation to the
President and Senior Executive Vice President of FFCC, (B) by adding back to
such net income any extraordinary items of income and expense such as merger
related expenses; and (C) by reducing from such net income any reductions to
FFCC net worth not reflected in FFCC's consolidated income statement for such
fiscal year or period. As used in this Section 3, (1) "Equity Capital" means
FFCC's consolidated Stockholders Equity including preferred stock at the
December 31 immediately preceding the beginning of the fiscal year for which
the calculation is being made, determined in accordance with GAAP and (2)
"Return on Equity Capital" for any fiscal year means the percentage determined
by dividing FFCC's consolidated net income after all taxes determined in
accordance with GAAP for such fiscal year by Equity Capital for such preceding
December 31; provided that such calculation shall be adjusted as set forth in
the immediately succeeding sentence. If FFCC sells its equity securities
during the fiscal year, Equity Capital shall be increased by the net proceeds
to FFCC (after expenses) of such sale multiplied by a fraction the numerator of
which shall be the number of days in such fiscal year which had elapsed on the
date of the closing of such sale and the denominator of which shall be 365.
(iii) At the option of FFCC, up to 50% of the amount
payable under Section 3(b) may be in the form of shares of FFCC Common Stock.
For purposes of computing the number of shares to be issued, the shares of
Common Stock will be assigned a value equal to the average of last sales prices
of the Common Stock as reported on the NASDAQ National Market System for the
five trading dates immediately preceding the date of issuance;
(c) You shall be entitled to participate in the other
benefit plans of FFCC upon the terms and conditions on which such benefits are
made available to other officers of FFCC. Nothing herein shall obligate FFCC
to continue any existing benefit plan or to establish any replacement benefit
plan.
(d) You shall be entitled to reimbursement for reasonable
travel and entertainment expenses incurred in connection with the rendering of
your services hereunder. Nothing contained herein shall authorize you to make
any political contributions, including but not limited to payments for dinners
and advertising in any political party program or any other payment to any
person which might be deemed a bribe, kickback or otherwise and improper
payment under corporate policy or practice and no portion of the compensation
payable hereunder is for any such purpose.
(e) Payments under this Agreement shall be subject to
reduction by the amount of any applicable federal, Commonwealth, state or
municipal income, withholding, social security, state disability insurance, or
similar or other taxes or other items which may be required or authorized to be
deducted by law or custom.
(f) No additional compensation shall be due to you for
services performed or offices held in any subsidiary, division, affiliate, or
venture of FFCC.
<PAGE> 4
Mr. Salomon Levis
As of August 29, 1995
Page 4
4. MISCELLANEOUS PROVISIONS RELATING TO THE BONUS AND OTHER MATTERS
(a) Your acceptance of this Agreement will confirm that
you understand and agree that the granting of the incentive compensation
referred to in Section 3(b) and the receipt of any incentive bonus thereunder
(the "incentive compensation"), and any action thereunder, does not involve any
statement or representation of any kind by FFCC as to its business, affairs,
earnings or assets, or as to the tax status of the incentive compensation or
the tax consequences of any payment thereof, or otherwise. You further agree
that any action at any time taken by or on behalf of FFCC or by its directors
or any committee thereof, which might or shall at any time adversely affect you
or the incentive compensation, may be freely taken notwithstanding any such
adverse effect without your being thereby or otherwise entitled to any right or
claim against FFCC, Doral or any other person or party by reason thereof.
(b) The incentive compensation is personal to you and,
except as provided or contemplated in Section 3(b) above, in the event of your
death or incapacity, is not transferable or assignable either by your act or by
operation of law, and no assignee, trustee in bankruptcy, receiver or other
party whosoever shall have any right to demand any incentive compensation or
any other right with respect to it. If, in the event of your death or
incapacity, your legal representative shall be entitled to demand the incentive
compensation under any of the provisions hereof then, unless otherwise
indicated by the context or otherwise required by any term hereof, references
to "you" shall apply to said representative.
(c) If and when questions arise from time to time as to
the intent, meaning or application of any one or more of the provisions hereof
such questions will be decided by the Board of Directors of FFCC or any
Committee appointed to consider such matters, or, in the event FFCC is merged
into or consolidated with any other corporation, by the Board of Directors (or
a Committee appointed by it) of the surviving or resulting corporation, and the
decision of such Board of Directors or Committee, as the case may be, as to
what is a fair and equitable settlement of each such question or as to what is
a fair and proper interpretation of any provision hereof or thereof, whatever
the effect of such a decision may be, beneficial or adverse, upon the incentive
compensation, shall be conclusive and binding and you hereby agree that the
incentive compensation is granted to and accepted by you subject to such
condition and understanding. You understand that the incentive compensation is
not held or set aside in trust and (1) FFCC may seek to retain, offset, attach
or similarly place a lien on such funds in circumstances where you have been
discharged for cause and shall be entitled to do so for (x) malfeasance
damaging to FFCC, (y) conversion to you of an FFCC opportunity, or (z) a
violation of FFCC's conflict of interest policy, in each case as determined in
the sole discretion of the Board of Directors, and (2) in the event FFCC is
unable to make any payment under this Agreement because of insolvency,
bankruptcy or similar status or proceedings, you will be treated as a general
unsecured creditor of FFCC and may be entitled to no priority under applicable
law with respect to such payments.
5. RESTRICTIONS ON COMPETITION
During the term of this Agreement and for a period of one year
after you cease to be an employee of FFCC or an affiliate of FFCC, you will
not, without the prior written consent of FFCC, (a) accept employment or render
service to any person, firm or corporation, directly or indirectly, in
competition with FFCC, or any affiliate thereof for any purpose which would be
competitive with the
<PAGE> 5
Mr. Salomon Levis
As of August 29, 1995
Page 5
mortgage banking business within the Commonwealth of Puerto Rico or any other
geographic area in which FFCC or any affiliate of FFCC by which you were
employed, conducted operations (the "Restricted Area") or any business as to
which studies or preparations relating to the entry into which were made by
FFCC or any affiliate of FFCC by which you were employed within two years prior
thereto (collectively, the "Restricted Businesses") or (b) directly or
indirectly, enter into or in any manner take part in or lend your name, counsel
or assistance to any venture, enterprise, business or endeavor, wither as
proprietor, principal, investor, partner, director, officer, employee,
consultant, adviser, agent, independent contractor or in any other capacity
whatsoever for any purpose which would be competitive with the Restricted
Businesses in the Restricted Area. An investment not exceeding 5% of the
outstanding stock in any corporation regularly traded on any National
Securities Exchange or in the Over-the-Counter market shall not be deemed to
violate this provision, provided that you shall not render any services for
such corporation.
6. TERMINATION OF EMPLOYMENT
(a) Your employment hereunder may be terminated for
dishonesty, death, incapacity, or inability to perform the duties of your
employment on a daily basis, resulting from physical or mental disability
caused by illness, accident or otherwise or refusal to perform the duties and
responsibilities of you employment hereunder, or breach of fidelity to FFCC.
(b) At any time following a "Change in Control" of FFCC,
this Agreement may be terminated by FFCC or you on 30 days' written notice to
you or FFCC, as the case may be, such termination to be effective as of the end
of the calendar year during which such notice is given. As used herein, a
"Change in Control" shall be deemed to have occurred at such time as (i) any
person or group (other than the Cullman & Ernst group or any member thereof)
becomes the beneficial owner of more than 50% of the voting power of FFCC's
voting stock, or (ii) FFCC consolidates with or merges into any other
corporation or conveys or otherwise disposes of all or substantially all of its
assets to any person.
(c) If at any time you shall voluntarily terminate your
employment, then this Agreement, except for Section 5 hereof, shall terminate
and all further obligations of FFCC hereunder shall cease, provided that in any
termination pursuant to subsection (b) of this Section 6 you shall be entitled
to receive all compensation due to pursuant to Section 3 hereof for the
calendar year in which such date of termination occurs.
You agree that this Section 6 shall create no additional
rights in you to direct the operations of FFCC.
7. REGISTRATION RIGHTS
(a) Upon your written request or requests that FFCC
effect a registration on Form S-3 and any related qualification or compliance
with respect to all or a part of the securities granted to you pursuant to
Section 3 (b)(iii) hereof (the "Registrable Securities") and other senior
executives of FFCC holding similar registration rights (individually a "Holder"
and collectively, the "Holders"), FFCC will:
<PAGE> 6
Mr. Salomon Levis
As of August 29, 1995
Page 6
(i) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other
Holders;
(ii) as soon as practicable, effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities
of any other Holder or Holders joining in such request as are specified in a
written request given within 15 days after receipt of such written notice from
FFCC; provided, however, that FFCC shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 7: (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Holders,
together with the holders of any other securities of FFCC entitled to inclusion
in such registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $250,000; (3) if FFCC
shall furnish to the Holders a certificate signed by an officer of FFCC stating
that in the good faith judgment of the Board of Directors of FFCC, it would be
seriously detrimental to FFCC and its shareholders for such Form S-3
registration statement, in which event FFCC shall have the right to defer the
filing of the Form S-3 Registration Statement for a period of not more than 120
days after receipt of the request of the Holder or Holders under this Section
7; (4) if FFCC has, within the 12-month period preceding the date of such
request, already effected two registrations on Form S-3 for the Holders
pursuant to this Section 7; (5) if FFCC shall have effected any registration
(other than on S-3 or any successor Form) within the six month period preceding
the date of such request; or (6) in any particular jurisdiction in which FFCC
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance;
and
(iii) Subject to the foregoing, FFCC shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection with a
registration requested pursuant to this Section 7, including (without
limitation) all registration, filing, qualification, printer's and accounting
fees and the reasonable fees and disbursements of counsel for the selling
Holder or Holders and counsel for FFCC, but excluding any underwriters'
discounts or commissions associated with Registrable Securities, shall be borne
pro rata by the Holder or Holders selling securities pursuant to Form S-3
Registration.
(b) The rights to cause FFCC to register Registrable
Securities pursuant to this Section 7 may not be assigned or transferred in any
fashion.
8. WAIVERS AND MODIFICATIONS
No waiver by either party of any breach by the other of any
provisions hereof shall be deemed to be a waiver of any later or other breach
thereof, or as a waiver of any such or other provision of this Agreement. This
Agreement sets forth all of the terms of the understandings between the parties
with reference to the subject matter set forth herein and may not be waived,
changed, discharged or terminated orally or by any course of dealing between
the parties, but only by an instrument in writing signed by the party against
whom any waiver, change, discharge or termination is sought.
<PAGE> 7
Mr. Salomon Levis
As of August 29, 1995
Page 7
9. SEVERABILITY
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective under applicable law. In the
event that any provision, or any portion of any provision, of this Agreement
shall be held to be void and unenforceable, the remaining provisions of this
Agreement, and the remaining portion of any provision found void or
unenforceable in part only, shall continue in full force and effect.
10. ARBITRATION
Any dispute arising under this Agreement shall be submitted to
arbitration in New York, New York under the rules of the American Arbitration
Association.
11. NOTICES
Any notice or communication required or permitted to be given
hereunder shall be deemed duly given if delivered personally or sent by
registered or certified mail, return receipt requested, to the address of the
intended recipient as herein set forth or to such other address as a party may
theretofore have specified in writing to the other by delivering or mailing in
a similar manner. Any notice or communication intended for FFCC shall be
addressed to the attention of its Board of Directors.
12. GOVERNING LAW
This Agreement shall be construed in accordance with the laws
of the Commonwealth of Puerto Rico.
13. MISCELLANEOUS
This Agreement shall be binding upon the successors and
assigns of FFCC. This Agreement is personal to you, and you therefore may not
assign your duties under this Agreement. The headings of the Sections of this
Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof or to affect the meaning hereof.
<PAGE> 8
Mr. Salomon Levis
As of August 29, 1995
Page 8
If the foregoing terms and conditions correctly embody your mutual
understanding with FFCC, kindly endorse your acceptance and agreement therewith
in the space below provided, whereupon this shall become a binding agreement.
Very truly yours,
FIRST FINANCIAL CARIBBEAN CORPORATION
By: /s/ Richard F. Bonini
---------------------------------
Name:
Title:
Accepted and Agreed to as of the
date first above set forth:
/s/ Solomon Levis
- ----------------------------
Salomon Levis
<PAGE> 1
EXHIBIT 10.36
FIRST FINANCIAL CARIBBEAN CORPORATION
1159 F.D. Roosevelt Avenue
Puerto Nuevo, Puerto Rico 00920
As of August 29, 1995
Mrs. Zoila Levis
1159 F.D. Roosevelt Avenue
Puerto Nuevo, Puerto Rico 00920
Dear Mrs. Levis:
We are pleased to detail herein below the provisions of your
employment agreement with First Financial Caribbean Corporation ("FFCC").
1. TERMS OF EMPLOYMENT
The term of this Agreement shall be for a period commencing
retroactively to January 1, 1995 and ending December 31, 1996, unless sooner
terminated as herein provided. This Agreement supersedes and cancels all prior
employment, personal service or similar agreements between you and FFCC and its
subsidiaries, divisions and ventures.
2. POSITION AND RESPONSIBILITIES
You will serve as President of FFCC. By your acceptance of
this Agreement, you undertake to accept such employment and to devote your full
time and attention to FFCC, and to use your best efforts, ability and fidelity
in the performance of the duties attaching to such employment. During the term
of your employment hereunder, you shall not perform any services for any other
company, which services conflict in any way with your obligations under the two
preceding sentences of this Section 2, whether or not such company is
competitive with the businesses of FFCC, provided, however, that nothing in
this Agreement shall preclude you from devoting reasonable periods required for
(i) serving as a director or member of a committee of any
organization involving no conflict or potential conflict of interest with the
interests of FFCC;
(ii) delivering lectures, fulfilling speaking engagements,
teaching at educational institutions;
(iii) engaging in charitable and community activities; and
(iv) managing your personal and family investments,
provided that such activities do not interfere with the regular performance of
your duties and responsibilities under this Agreement.
You shall, at all times during the term hereof, be subject to
the supervision and direction of the Chairman of the Board and Chief Executive
Officer and the Board of Directors of FFCC with respect to your duties,
responsibilities and the exercise of your powers.
<PAGE> 2
Mrs. Zoila Levis
As of August 29, 1995
Page 2
3. COMPENSATION
(a) During the term of this Agreement you shall receive
an annual salary of $300,000 annually, payable no less often than monthly in
accordance with corporate policy.
(b) (i) During the term of this Agreement, you shall
also be entitled to receive an annual incentive bonus
equal to the sum of the following:
(1) $300,000 if FFCC earns $10.0
million of Adjusted Net Income (as
hereinafter defined);
(2) 3% of Adjusted Net Income in
excess of $10.0 million and up to $20.0
million; and
(3) 5% of Adjusted Net Income in
excess of $20.0 million, to the extent such
Adjusted Net Income exceeds an amount equal
to a 15% Return on Equity Capital (as
hereinafter defined);
provided, however, that total salary and incentive compensation payable to you
pursuant to this Agreement shall not exceed $1.5 million per annum.
(ii) The incentive bonus shall be payable
annually by FFCC within 30 days following the date on
which its Annual Report on Form 10-K for the fiscal
year ended the prior December 31 shall have been
filed with the United States Securities and Exchange
Commission; provided that such amount shall only be
payable if you shall have served as President to FFCC
pursuant to this Agreement for the entire fiscal year
to which such payments relate. As used in this
Section 3, "Adjusted Net Income" means the annual
consolidated net income by FFCC and its subsidiaries
after all taxes (including net income from equity
interests held by FFCC in any other venture and net
income of any successor of FFCC which may be formed
by merger, consolidation or sale of substantially all
of the assets of FFCC) during the calendar year
preceding the payment as determined in accordance
with generally accepted accounting principles applied
on a consistent basis throughout the periods involved
and as shown by FFCC's published consolidated
financial statements audited by its independent
accountants (hereinafter referred to as "GAAP"), such
net income to be adjusted (A) by reducing from such
net income any payments made pursuant to Section
3(b)(i) hereof and payments of similar incentive
compensation to the Chairman of the Board and Senior
Executive Vice President of FFCC, (B) by adding back
to such net income any extraordinary items of income
and expense such as merger related expenses; and (C)
by reducing from such net income any reductions to
FFCC net worth not reflected in FFCC's consolidated
income statement for such fiscal year or period. As
used in this Section 3, (1) "Equity Capital" means
FFCC's consolidated Stockholders Equity including
preferred stock at the December 31 immediately
preceding the beginning of the fiscal year for which
the calculation is being made, determined in
accordance with GAAP and (2) "Return on Equity Capi-
tal" for any fiscal year means the percentage
determined by dividing FFCC's consolidated net income
after all taxes determined in accordance with GAAP
for such fiscal year by Equity Capital for such
preceding
<PAGE> 3
Mrs. Zoila Levis
As of August 29, 1995
Page 3
December 31; provided that such calculation shall be
adjusted as set forth in the immediately succeeding
sentence. If FFCC sells its equity securities during
the fiscal year, Equity Capital shall be increased by
the net proceeds to FFCC (after expenses) of such
sale multiplied by a fraction the numerator of which
shall be the number of days in such fiscal year which
had elapsed on the date of the closing of such sale
and the denominator of which shall be 365.
(iii) At the option of FFCC, up to 50% of
the amount payable under Section 3(b)(i) may be in
the form of shares of FFCC Common Stock. For
purposes of computing the number of shares to be
issued, the shares of Common Stock will be assigned a
value equal to the average of last sales prices of
the Common Stock as reported on the NASDAQ National
Market System for the five trading dates immediately
preceding the date of issuance;
(c) You shall be entitled to participate in the other
benefit plans of FFCC upon the terms and conditions on which such benefits are
made available to other officers of FFCC. Nothing herein shall obligate FFCC
to continue any existing benefit plan or to establish any replacement benefit
plan.
(d) You shall be entitled to reimbursement for reasonable
travel and entertainment expenses incurred in connection with the rendering of
your services hereunder. Nothing contained herein shall authorize you to make
any political contributions, including but not limited to payments for dinners
and advertising in any political party program or any other payment to any
person which might be deemed a bribe, kickback or otherwise and improper
payment under corporate policy or practice and no portion of the compensation
payable hereunder is for any such purpose.
(e) Payments under this Agreement shall be subject to
reduction by the amount of any applicable federal, Commonwealth, state or
municipal income, withholding, social security, state disability insurance, or
similar or other taxes or other items which may be required or authorized to be
deducted by law or custom.
(f) No additional compensation shall be due to you for
services performed or offices held in any subsidiary, division, affiliate, or
venture of FFCC.
4. MISCELLANEOUS PROVISIONS RELATING TO THE BONUS AND OTHER MATTERS
(a) Your acceptance of this Agreement will confirm that
you understand and agree that the granting of the incentive compensation
referred to in Section 3(b) (the "incentive compensation"), and any action
thereunder, does not involve any statement or representation of any kind by
FFCC as to its business, affairs, earnings or assets, or as to the tax status
of the incentive compensation or the tax consequences of any payment thereof,
or otherwise. You further agree that any action at any time taken by or on
behalf of FFCC or by its directors or any committee thereof, which might or
shall at any time adversely affect you or the incentive compensation, may be
freely taken notwithstanding any such adverse effect without your being thereby
or otherwise entitled to any right or claim against FFCC, Doral or any other
person or party by reason thereof.
(b) The incentive compensation is personal to you and,
except as provided as contemplated in Section 3(b) above, in the event of your
death or incapacity, is not transferable or assignable either
<PAGE> 4
Mrs. Zoila Levis
As of August 29, 1995
Page 4
by your act or by operation of law, and no assignee, trustee in bankruptcy,
receiver or other party whosoever shall have any right to demand any incentive
compensation or any other right with respect to it. If, in the event of your
death or incapacity, your legal representative shall be entitled to demand the
incentive compensation under any of the provisions hereof then, unless
otherwise indicated by the context or otherwise required by any term hereof,
references to "you" shall apply to said representative.
(c) If and when questions arise from time to time as to
the intent, meaning or application of any one or more of the provisions hereof
such questions will be decided by the Board of Directors of FFCC or any
Committee appointed to consider such matters, or, in the event FFCC is merged
into or consolidated with any other corporation, by the Board of Directors (or
a Committee appointed by it) of the surviving or resulting corporation, and the
decision of such Board of Directors or Committee, as the case may be, as to
what is a fair and equitable settlement of each such question or as to what is
a fair and proper interpretation of any provision hereof or thereof, whatever
the effect of such a decision may be, beneficial or adverse, upon the incentive
compensation, shall be conclusive and binding and you hereby agree that the
incentive compensation is granted to and accepted by you subject to such
condition and understanding. You understand that the incentive compensation is
not held or set aside in trust and (1) FFCC may seek to retain, offset, attach
or similarly place a lien on such funds in circumstances where you have been
discharged for cause and shall be entitled to do so for (x) malfeasance
damaging to FFCC, (y) conversion to you of an FFCC opportunity, or (z) a
violation of FFCC's conflict of interest policy, in each case as determined in
the sole discretion of the Board of Directors, and (2) in the event FFCC is
unable to make any payment under this Agreement because of insolvency,
bankruptcy or similar status or proceedings, you will be treated as a general
unsecured creditor of FFCC and may be entitled to no priority under applicable
law with respect to such payments.
5. RESTRICTIONS ON COMPETITION
During the term of this Agreement and for a period of one year
after you cease to be an employee of FFCC or an affiliate of FFCC, you will
not, without the prior written consent of FFCC, (a) accept employment or render
service to any person, firm or corporation, directly or indirectly, in
competition with FFCC, or any affiliate thereof for any purpose which would be
competitive with the mortgage banking business within the Commonwealth of
Puerto Rico or any other geographic area in which FFCC or any affiliate of FFCC
by which you were employed, conducted operations (the "Restricted Area") or any
business as to which studies or preparations relating to the entry into which
were made by FFCC or any affiliate of FFCC by which you were employed within
two years prior thereto (collectively, the "Restricted Businesses") or (b)
directly or indirectly, enter into or in any manner take part in or lend your
name, counsel or assistance to any venture, enterprise, business or endeavor,
whether as proprietor, principal, investor, partner, director, officer,
employee, consultant, adviser, agent, independent contractor or in any other
capacity whatsoever for any purpose which would be competitive with the
Restricted Businesses in the Restricted Area. An investment not exceeding 5%
of the outstanding stock in any corporation regularly traded on any National
Securities Exchange or in the Over-the-Counter market shall not be deemed to
violate this provision, provided that you shall not render any services for
such corporation.
<PAGE> 5
Mrs. Zoila Levis
As of August 29, 1995
Page 5
6. TERMINATION OF EMPLOYMENT
(a) Your employment hereunder may be terminated for
dishonesty, death, incapacity, or inability to perform the duties of your
employment on a daily basis, resulting from physical or mental disability
caused by illness, accident or otherwise or refusal to perform the duties and
responsibilities of you employment hereunder, or breach of fidelity to FFCC.
(b) At any time following a "Change in Control" of FFCC,
this Agreement may be terminated by FFCC or you on 30 days' written notice to
you or FFCC, as the case may be, such termination to be effective as of the end
of the calendar year during which such notice is given. As used herein, a
"Change in Control" shall be deemed to have occurred at such time as (i) any
person or group (other than the Cullman & Ernst group or any member thereof)
becomes the beneficial owner of more than 50% of the voting power of FFCC's
voting stock, or (ii) FFCC consolidates with or merges into any other
corporation or conveys or otherwise disposes of all or substantially all of its
assets to any person.
(c) If at any time you shall voluntarily terminate your
employment, then this Agreement, except for Section 5 hereof, shall terminate
and all further obligations of FFCC hereunder shall cease, provided that in any
termination pursuant to subsection (b) of this Section 6 you shall be entitled
to receive all compensation due to pursuant to Section 3 hereof for the
calendar year in which such date of termination occurs.
You agree that this Section 6 shall create no additional
rights in you to direct the operations of FFCC.
7. REGISTRATION RIGHTS
(a) Upon your written request or requests that FFCC
effect a registration on Form S-3 and any related qualification or compliance
with respect to all or a part of the securities granted to you pursuant to
Section 3 (b)(iii) hereof (the "Registrable Securities") and other senior
executives of FFCC holding similar registration rights (individually a "Holder"
and collectively, the "Holders"), FFCC will:
(i) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other
Holders;
(ii) as soon as practicable, effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities
of any other Holder or Holders joining in such request as are specified in a
written request given within 15 days after receipt of such written notice from
FFCC; provided, however, that FFCC shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 7: a) if
Form S-3 is not available for such offering by the Holders; b) if the Holders,
together with the holders of any other securities of FFCC entitled to inclusion
in such registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $250,000; c) if FFCC shall
furnish to the Holders a certificate signed by an officer of FFCC stating that
in the good faith judgment of the Board of Directors of FFCC, it would be
seriously detrimental to FFCC and
<PAGE> 6
Mrs. Zoila Levis
As of August 29, 1995
Page 6
its shareholders for such Form S-3 registration statement, in which event FFCC
shall have the right to defer the filing of the Form S-3 Registration Statement
for a period of not more than 120 days after receipt of the request of the
Holder or Holders under this Section 7; d) if FFCC has, within the 12-month
period preceding the date of such request, already effected two registrations
on Form S-3 for the Holders pursuant to this Section 7; e) if FFCC shall have
effected any registration (other than on S-3 or any successor Form) within the
six month period preceding the date of such request; or f) in any particular
jurisdiction in which FFCC would be required to qualify to do business or to
execute a general consent to service of process in effecting such registration,
qualification or compliance; and
(iii) Subject to the foregoing, FFCC shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection with a
registration requested pursuant to this Section 7, including (without
limitation) all registration, filing, qualification, printer's and accounting
fees and the reasonable fees and disbursements of counsel for the selling
Holder or Holders and counsel for FFCC, but excluding any underwriters'
discounts or commissions associated with Registrable Securities, shall be borne
pro rata by the Holder or Holders selling securities pursuant to Form S-3
Registration.
(b) The rights to cause FFCC to register Registrable
Securities pursuant to this Section 7 may not be assigned or transferred in any
fashion.
8. WAIVERS AND MODIFICATIONS
No waiver by either party of any breach by the other of any
provisions hereof shall be deemed to be a waiver of any later or other breach
thereof, or as a waiver of any such or other provision of this Agreement. This
Agreement sets forth all of the terms of the understandings between the parties
with reference to the subject matter set forth herein and may not be waived,
changed, discharged or terminated orally or by any course of dealing between
the parties, but only by an instrument in writing signed by the party against
whom any waiver, change, discharge or termination is sought.
9. SEVERABILITY
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective under applicable law. In the
event that any provision, or any portion of any provision, of this Agreement
shall be held to be void and unenforceable, the remaining provisions of this
Agreement, and the remaining portion of any provision found void or
unenforceable in part only, shall continue in full force and effect.
10. ARBITRATION
Any dispute arising under this Agreement shall be submitted to
arbitration in New York, New York under the rules of the American Arbitration
Association.
<PAGE> 7
Mrs. Zoila Levis
As of August 29, 1995
Page 7
11. NOTICES
Any notice or communication required or permitted to be given
hereunder shall be deemed duly given if delivered personally or sent by
registered or certified mail, return receipt requested, to the address of the
intended recipient as herein set forth or to such other address as a party may
theretofore have specified in writing to the other by delivering or mailing in
a similar manner. Any notice or communication intended for FFCC shall be
addressed to the attention of its Board of Directors.
12. GOVERNING LAW
This Agreement shall be construed in accordance with the laws
of the Commonwealth of Puerto Rico.
13. MISCELLANEOUS
This Agreement shall be binding upon the successors and
assigns of FFCC. This Agreement is personal to you, and you therefore may not
assign your duties under this Agreement. The headings of the Sections of this
Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof or to affect the meaning hereof.
If the foregoing terms and conditions correctly embody your
mutual understanding with FFCC, kindly endorse your acceptance and agreement
therewith in the space below provided, whereupon this shall become a binding
agreement.
Very truly yours,
FIRST FINANCIAL CARIBBEAN CORPORATION
By: /s/ Solomon Levis
---------------------------------
Name:
Title:
Accepted and Agreed to as of the
date first above set forth:
/s/ Zoila Levis
- -------------------------------
Zoila Levis
<PAGE> 1
EXHIBIT 10.43
EMPLOYMENT AGREEMENT
BETWEEN RICHARD F. BONINI (hereinafter referred to as the "Officer")
and FIRST FINANCIAL CARIBBEAN CORPORATION, A Puerto Rico corporation with
principal offices in San Juan, Puerto Rico, (hereinafter referred to as
"FFCC"), represented herein by its Chairman of the Board and Chief Executive
Officer.
In consideration of the mutual promises, covenants and agreements
herein contained, it is agreed as follows:
1. POSITION AND RESPONSIBILITIES
You will serve as Senior Executive Vice President of FFCC. By
your acceptance of this Agreement, you undertake to accept such employment and
to devote your full time and attention to FFCC, and to use your best efforts,
ability and fidelity in the performance of the duties attaching to such
employment. During the term of your employment hereunder, you shall not
perform any services for any other company, which services conflict in any way
with your obligations under the two preceding sentences of this Section 1,
whether or not such company is competitive with the businesses of FFCC,
provided, however, that nothing in this Agreement shall preclude you from
devoting reasonable periods required for
(i) serving as a director or member of a committee of any
organization involving no conflict or potential conflict of interest with the
interests of FFCC;
(ii) delivering lectures, fulfilling speaking engagements,
teaching at educational institutions;
(iii) engaging in charitable and community activities; and
(iv) managing your personal and family investments, provided
that such activities do not interfere with the regular performance of your
duties and responsibilities under this Agreement.
You shall, at all times during the term hereof, be subject to
the supervision and direction of the Chairman of the Board of Directors of FFCC
with respect to your duties, responsibilities and the exercise of your powers
which shall include, among other things, matters relating to financial, tax and
<PAGE> 2
2
employee benefit aspects of FFCC's operations and shareholder relations and
general administrative matters.
2. TERM. This Agreement shall be effective retroactive to
January 1, 1995, and shall remain in effect until June 30, 1997.
3. BASIC COMPENSATION. FFCC shall pay the Officer, and the
Officer shall accept from FFCC, as basic compensation for Officer's services
hereunder, the sum of TWO HUNDRED FORTY THOUSAND DOLLARS ($240,000) per year,
such sum to be payable at the rate of $20,000 per month on the last day of each
month.
FFCC shall reimburse Officer for those reasonable and
necessary expenses incurred by Officer in connection with the services provided
hereunder.
4. INCENTIVE FEES. (a) During the term of this Agreement, the
Officer shall also be entitled to receive an annual incentive bonus equal to
the sum of the following:
(i) $150,000 if FFCC earns $10.0 million of Adjusted
Net Income (as hereinafter defined);
(ii) 3% of Adjusted Net Income in excess of $10.0
million and up to $20.0 million to the extent such Adjusted Net Income exceeds
an amount equal to a 15% Return on Equity Capital (as hereinafter defined); and
(iii) 5% of Adjusted Net Income in excess of $20.0
million to the extent such Adjusted Net Income exceeds an amount equal to a 15%
Return on Equity Capital;
provided, however, that total consulting fees and incentive compensation
payable to the Officer in connection with services rendered hereunder shall not
exceed $1.2 million per annum.
(b) The incentive bonus shall be payable annually by FFCC
within 30 days following the date on which its Annual Report on Form 10-K for
the fiscal year ended the prior December 31 shall have been filed with the
United States Securities and Exchange Commission; provided that such amount
shall only be payable if you shall have served as a Officer pursuant to this
Agreement for the entire fiscal
<PAGE> 3
3
year to which such payments relate. As used in this Section 4, "Adjusted Net
Income" means the annual consolidated net income by FFCC and its subsidiaries
after all taxes (including net income from equity interests held by FFCC in any
other venture and net income of any successor of FFCC which may be formed by
merger, consolidation or sale of substantially all of the assets of FFCC)
during the calendar year preceding the payment as determined in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved and as shown by FFCC's published consolidated
financial statements audited by its independent accountants (hereinafter
referred to as "GAAP"), such net income to be adjusted (A) by reducing from
such net income any payments made pursuant to Section 4(a) hereof and payments
of similar incentive compensation to the Chairman of the Board and Chief
Executive Officer and President of FFCC, (B) by adding back to such net income
any extraordinary items of income and expense such as merger related expenses;
and (C) by reducing from such net income any reductions to FFCC net worth not
reflected in FFCC's consolidated income statement for such fiscal year or
period. As used in this Section 4, (1) "Equity Capital" means FFCC's
consolidated Stockholders Equity including preferred stock at the December 31
immediately preceding the beginning of the fiscal year for which the
calculation is being made, determined in accordance with GAAP and (2) "Return
on Equity Capital" for any fiscal year means the percentage determined by
dividing FFCC's consolidated net income after all taxes determined in
accordance with GAAP for such fiscal year by Equity Capital for such preceding
December 31; provided that such calculation shall be adjusted as set forth in
the immediately succeeding sentence. If FFCC sells its equity securities
during the fiscal year, Equity Capital shall be increased by the net proceeds
to FFCC (after expenses) of such sale multiplied by a fraction the numerator of
which shall be the number of days in such fiscal year which had elapsed on the
date of the closing of such sale and the denominator of which shall be 365.
(c) At the option of FFCC, up to 50% of the amount payable
under Section 4(a) may be in the form of shares of FFCC Common Stock. For
purposes of computing the number of shares to be issued, the shares of Common
Stock will be assigned a value equal to the average of last sales prices of the
Common Stock as reported on the NASDAQ National Market System for the five
trading dates immediately preceding the date of issuance;
5. PENSION PLAN. In lieu of participation in FFCC's pension
plan, FFCC agrees to establish an annuity contract for the benefit of Officer
in the amount of $30,000 per year.
6. PAYMENT OF MEDICAL INSURANCE. In lieu of participation in
FFCC's medical plan, FFCC agrees to pay for Officer's medical insurance.
<PAGE> 4
4
7. MEMBERSHIP IN BOARD OF DIRECTORS. The Officer will be
nominated for election to FFCC's Board of Directors.
8. INCIDENTAL EXPENSES. If the Officer is required to provide
services within Puerto Rico, his housing and other incidental expenses will be
paid by FFCC.
9. TERMINATION OF ENGAGEMENT. Officer's engagement hereunder may
be terminated by FFCC for dishonesty, failure or refusal to perform his
obligations hereunder, breach of fidelity to FFCC or its affiliates or for any
reason violative of law or public policy. Termination shall take effect by
giving 30 days written notice by Certified Mail, Return Receipt Requested, or
by delivery in person to Officer. All payments due under this Agreement will
cease as of the date of termination.
10. CONFIDENTIAL INFORMATION. All documents, date, plans,
processes, reports and information of any nature that are made available by
FFCC, or that become available to Officer by virtue of this Agreement or the
relationship created by this Agreement, shall be held in strict confidence by
Officer. Such confidential disclosures that are made or such confidential
information that becomes available to Officer is made in reliance on this
understanding.
11. CONFIDENTIAL INFORMATION AFTER TERMINATION OR AGREEMENT. All
of the terms of the preceding paragraph shall remain in full force and effect
for a period of three (3) years after the termination of this Agreement for any
reason, and during such 3 year period, Officer shall not make or permit the
making of any public announcement or statement of any kind that he was formally
connected with FFCC.
12. REGISTRATION RIGHTS
(a) Upon the written request or requests of the Officer
that FFCC effect a registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the securities granted to you
pursuant to Section 4(b)(iii) hereof (the "Registrable Securities") and senior
executives of FFCC holding similar registration rights (individually a "Holder"
and collectively, the "Holders"), FFCC will:
(i) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other
Holders;
<PAGE> 5
5
(ii) as soon as practicable, effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities
of any other Holder or Holders joining in such request as are specified in a
written request given within 15 days after receipt of such written notice from
FFCC; provided, however, that FFCC shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 12: (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Holders,
together with the holders of any other securities of FFCC entitled to inclusion
in such registration, propose to sell Registrable Securities and such other
securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $250,000; (3) if FFCC
shall furnish to the Holders a certificate signed by an officer of FFCC stating
that in the good faith judgment of the Board of Directors of FFCC, it would be
seriously detrimental to FFCC and its shareholders for such Form S-3
registration statement, in which event FFCC shall have the right to defer the
filing of the Form S-3 Registration Statement for a period of not more than 120
days after receipt of the request of the Holder or Holders under this Section
12; (4) if FFCC has, within the 12-month period preceding the date of such
request, already effected two registrations on Form S-3 for the Holders
pursuant to this Section 12; (5) if FFCC shall have effected any registration
(other than on S-3 or any successor Form) within the six month period preceding
the date of such request; or (6) in any particular jurisdiction in which FFCC
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance;
and
(iii) Subject to the foregoing, FFCC shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection with a
registration requested pursuant to this Section 12, including (without
limitation) all registration, filing, qualification, printer's and accounting
fees and the reasonable fees and disbursements of counsel for the selling
Holder or Holders and counsel for FFCC, but excluding any underwriters'
discounts or commissions associated with Registrable Securities, shall be borne
pro rata by the Holder or Holders selling securities pursuant to Form S-3
Registration.
(b) The rights to cause FFCC to register Registrable
Securities pursuant to this Section 12 may not be assigned or transferred in
any fashion.
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6
13. ASSIGNABILITY. Officer may not sub-contract or assign any of
his obligation hereunder without obtaining FFCC's prior written approval.
14. NO WAIVER. Failure on the part of FFCC to complain of any
action or non-action on the part of Officer, no matter how long the same may
continue shall never to be deemed to be a waiver by FFCC of any rights
hereunder.
15. MODIFICATION OF CONTRACT. No waiver or modification of this
Agreement or of any covenant, condition, or limitation herein contained shall
be valid unless in writing and duly executed by the parties hereto.
16. ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties, and no alterations, modifications or
qualifications hereof shall be binding or of any force or effect against FFCC
unless in writing and signed by FFCC.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement at
New York, New York, this 29th day of August, 1995.
FIRST FINANCIAL CARIBBEAN CORPORATION
By: /s/ Solomon Levis
---------------------------------
Accepted and agreed to:
/s/ Richard F. Bonini
- ---------------------------
Richard F. Bonini
<PAGE> 1
EXHIBIT 10.63
UNOFFICIAL TRANSLATION
BANCO
SANTANDER
PUERTO RICO
________________________________________________________________________________
October 10, 1995
FIRST FINANCIAL CARIBBEAN
CORPORATION
Avenida F.D. Roosevelt 1159
Puerto Nuevo, Puerto Rico 00920
Attention: Mario S. Levis
Vice president and Treasurer
Dear Mr. Levis:
We are pleased to inform you that in acceptance of your request Banco
Santander Puerto Rico (the "Bank") has granted to FIRST FINANCIAL CARIBBEAN
CORPORATION (the "Borrowing Corporation") a loan for the amount of NINE MILLION
EIGHT HUNDRED AND EIGHTY-FIVE THOUSAND DOLLARS ($9,885,000.00), according to
the terms and conditions indicated below:
I. THE LOAN
A - QUANTITY:
The loan will be for the amount of NINE MILLION EIGHT HUNDRED
AND EIGHTY-FIVE THOUSAND DOLLARS ($9,885,000.00).
B - TERM:
The loan will be for the term of one (1) year to commence on
the day of the first disbursement. The Loan will be evidenced
by a note subscribed by the Borrowing Corporation to the order
of Banco Santander Puerto Rico, which will evidence the amount
disbursed, the interest rate to be charged and other terms and
conditions customary in this type of transaction.
C - INTEREST:
The loan will accrue interest at the rate of eight point five
percent (8.5%) per annum. Interest will
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be paid on a monthly basis at the Bank's principal office.
The loan will accrue interest at the same rate in the case of
any delay in payment.
D - PURPOSE:
The loan will be used by the Corporation working capital
purposes.
E - WARRANTIES:
The loan will be guaranteed by the assignment of several
subordinated certificates of C.M.O.'s with an outstanding
principal amount of $10,980,065.00, a copy of which are
attached hereto as Exhibit "A".
F - OTHER CONDITIONS:
The Borrowing Corporation will provide to the Bank quarterly
appraisals conducted by independent appraisers acceptable to
the Bank of the assigned securities, and under circumstances
where the appraised values are lower than the outstanding
principal amount of the loan, it will pay principal on the
loan in an amount equal to the difference. When the Bank
receives the payment of principal on the assigned securities,
it will credit Ninety Percent (90%) of the amount received to
the principal of the loan, and the difference, or the Ten
Percent (10%) remaining, will be sent to the Borrowing
Corporation.
This transaction limits the availability of the Line of Credit
granted by the Bank to the Borrowing Corporation under the
Contract executed on September 8, 1995, and the line of credit
is hereby reduced to Twenty Million One Hundred and Fifteen
Thousand Dollars ($20,115,000.00).
II. REPRESENTATIONS AND WARRANTIES
To induce the BANK to enter into and perform this Contract and
to grant the credit facility requested, the Borrowing Corporation makes the
following representations and warranties to the BANK, all of which shalll
remain effective after the execution of this Contract and all other documents
incorporated hereunder or related hereto.
A - ORGANIZATION, AUTHORITY, QUALIFICATION OF COMPANIES, ETC.
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1- The Borrowing Corporation is duly organized and
validly existing under the laws of the Commonwealth of Puerto
Rico.
2- The Borrowing Corporation has full corporate power
and authority to own its property and assets, to carry on its
business, and to attain its purposes, and it is duly
authorized to do business in the Commonwealth of Puerto Rico.
3- The Borrowing Corporation has the authority to enter
into and perform this Contract, to borrow money under this
Contract and to execute all the legal documents necessary and
related to this credit transaction.
B- AUTHORITY FOR THE LOAN.
The execution, completion and specific performance of this
Contract, the disbursements done according to it, and the
execution and delivery of all other legal documents have been
duly authorized in compliance with all legal requirements and
do not violate any laws, orders, or resolutions entered by any
court or any administrative agency, any covenant of any
contract or agreement to which the Borrowing Corporation is a
party or upon which the Borrowing Corporation is bound or any
of its assets are pledged; nor are they in conflict with, or
in violation of, or could they constitute a breach (upon due
notice and/or passage of time) of any such contract or
agreement.
C- FINANCIAL CONDITION.
The Borrowing Corporation has disclosed to the BANK financial
information which it assures, represents and warrants that, to
its best knowledge, is true, correct and complete, assuring
also to the BANK that to this date no adverse material change
has occurred which affects or could detrimentally affect the
information disclosed.
D- LITIGATION.
The Borrowing Company is not subject to any arbitration
proceeding, suit or any other judicial action in law or equity
in any court or administrative agency, local or federal, which
according to its knowledge could materially adversely affect
or threaten to affect the Corporation or which could
<PAGE> 4
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materially adversely affect its financial condition.
E- TAXES.
The Borrowing Corporation has complied with its tax
obligations in a timely manner and all such obligations have
been performed according to the judgment of its corporate
officials or the Borrowing Corporation has established
sufficient reserves for the payment of its tax obligations.
F- TITLE TO PROPERTY:
The Borrowing Corporation has and will have title to all
assets granted collateral guarantee to the Bank and of the
assets listed on the corporate financial statements delivered
to the Bank to induce it to execute this credit facility.
G- CONTRACTS.
The Borrowing Corporation has performed and complied with all
obligations contained in any contract or document to which it
is a party.
The Borrowing Corporation represents and warrants to the Bank
that this Contract and all its related legal documents, upon
their execution, will become valid and binding obligations,
enforceable against the Corporation according to their
respective terms.
III. CONDITIONS PRECEDENT TO LOAN
The BANK's obligation to make the disbursement under this Contract is
subject to the following conditions:
A- REPRESENTATIONS AND WARRANTIES.
At the time of the disbursement under this Contract the
representations and warranties made under Article II which are
of a continuing nature shall be true and correct and be as
valid as when they were originally made.
B- PERFORMANCE.
At the time of each and every disbursement made pursuant to
this Contract, the Borrowing Corporation shall have until then
faithfully performed and complied with all covenants,
agreements and condi-
<PAGE> 5
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tions of this Contract, and must also verify that no event of
default listed on Article VI of this Contract has ocurred or
is occurring, and that no event has ocurred or is occurring
which, with the giving of notice or the lapse of time or both,
would constitute an event of default.
C- DELIVERY OF REQUIRED DOCUMENTS.
On or before the disbursement of the credit facility granted
hereby, the BANK shall have received from the Borrowing
Corporation the following documents:
1) copy certified under oath of a Certificate executed by the
Board of Directors of the Borrowing Corporation authorizing
the execution of this Contract and all supplemental documents
hereto, including a certificate of the incumbency and
authority of the corporate officials authorized to execute
this Contract and all supplemental documents;
2) a legal opinion of Pietrantoni, Mendez & Alvarez stating
that the assets offered as guarantee on this loan are freely
assignable and that such assignment does not violate any local
and/or federal laws or regulations relating to the transfer or
pledge of such assets as contemplated on this Contract;
3) any other document which the Bank or the Bank's legal
counsel may reasonably require.
IV. AFFIRMATIVE COVENANTS
The Borrowing Corporation covenants and agrees as of the date hereof
and until the full payment and discharge of the principal of and interest on
the loan and any other outstanding obligations with the BANK, unless the BANK
shall otherwise consent in writting, as follows:
A- CORPORATE EXISTENCE.
It will do all things necessary to preserve and keep in full
force and effect its corporate existence, its lease
agreements, rights and franchises and will comply with all
laws necessary to preserve these; it will continue to carry on
and operate its business substantially as represented to the
Bank; and it will under any circumstance preserve and protect
all of its property.
<PAGE> 6
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B- MAINTENANCE AND REPAIR OF PROPERTY AND EQUIPMENT.
It will maintain its real and personal property in use and
available for use in the operation of its business; maintain
such property in working order and do from time to time all
necessary, ordinary or extraordinary, repairs; conduct all
renovations, additions, replacements, improvements and work
necessary to keep and preserve their value and their fitness
for the particular functions which they serve, and prevent
their alteration, transfer, destruction or utilization for any
purposes other than those for which they are presently being
used; allow the BANK, its agents or representatives, to
inspect such property as many times as it is reasonable and
comply with all the reasonable requirements which the BANK may
demand as a result of such inspections; and it will not sell,
alter, destroy, remove or use such properties and equipment
for any purposes other than those for which they are presently
being used, other than as done in the ordinary course of
business. It will fully comply with all obligations under the
executed Lease Agreements.
C- PAYMENT OF DEBT.
It will promptly pay all its debts and obligations according
to common business practice and it will pay and discharge all
taxes, assessments and governmental fees imposed upon it, as
well as any other lawful claims for labor, materials and
supplies upon any property, which if unpaid might become a
lien or charge upon such properties or any part thereof,
unless the validity thereof shall be contested in good faith.
D- FINANCIAL STATEMENTS.
It will provide to the BANK within One Hundred and Twenty
(120) days after the close of each fiscal year, the financial
statements including an income statement with corresponding
exhibits in support thereof, certified by independent
certified public accountants of good professional reputation,
which demonstrate the financial condition and the outcome of
its operations during such accounting period.
E- COMPLIANCE WITH LAWS AND REGULATIONS.
It will duly observe the compliance with all laws, regulations
or orders applicable to it and it will
<PAGE> 7
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obey all restrictions and/or limitations validly imposed by
governmental authorities, local or federal, relative to the
conduct of its business or to the ownership of its properties.
F- INSURANCE.
It will keep all its property, real and personal, duly insured
against loss and damage by fire, lightning, hurricanes,
earthquakes, flooding, explosions, strike turmoil, community
turmoil and riots, vandalism, malicious destruction, airplane
accidents, car accidents, and any other risk which is
customary to insure against under an extended coverage policy
in sufficient amounts to avoid having the Borrowing
Corporation become a co-insurer according to the terms of such
policies. It will keep all of its insurable property and
assets duly insured against such other losses and risks as are
normally insured against by companies engaged in the same
business and industry.
G- INSPECTION OF BOOKS.
The Borrowing Corporation will permit the designated
representative of the BANK to inspect its accounting books
whenever and as many times as the BANK reasonably requests.
The BANK will assume its expenses related to such inspections.
It will at all times keep its records and books of account in
the Commonwealth of Puerto Rico, in which books and records
true and complete entries will be made of all transactions and
operations performed, and it will watch over and protect such
records and books to avoid their loss or destruction.
H- NOTIFICATION OF CLAIMS.
The Borrowing Corporation will notify the BANK in writing
within ten (10) days following receipt of any summons or
service of process relating to any action, suit or proceeding
against, or which would adversely affect, the Borrowing
Corporation in any governmental agency or any court in which
the damages claimed exceed the maximum amount covered by any
outstanding insurance policy which would relate to such claim.
It will also notify the BANK of any claim, suit, litigation,
or execution of judgment of any lien which affects any of its
properties or in which a claim is made which could
substantially or materially affect its operations,
<PAGE> 8
-8-
business, properties, assets or its financial condition or
other conditions.
I- EVENTS OF DEFAULT.
It will notify the BANK of any condition, occurrence or event
which could constitute an event of default under this
Contract, and/or of any other Contract which payments might
have been assigned to the BANK, delivering a written
certification specifying the nature of such default, the time
during which it has existed and the course of action it
intends to take in relation to such default. Such
notification will be delivered to the BANK within the ten (10)
days following the occurrence of the event of default.
J- PROTECTION OF LIENS.
It will take all actions necessary to protect and preserve the
existence and validity of the guaranties offered to guarantee
the credit facility granted hereby and it will promptly
execute and present any declaration, document, contract or
agreement that the BANK might request from time to time to
perfect and preserve the offered guaranties and the terms and
conditions of this Contract.
K- BREACH UNDER THE EXECUTED DOCUMENTS.
The Borrowing Corporation covenants that the breach of any of
the legal documents executed will constitute a simultaneous
breach of this contract and upon its occurrence, the BANK will
have an immediate right to enforce any of the rights and
privileges afforded by this Contract and any of its legal
documents complementary to this Contract.
L- FAILURE TO PAY OR TO PERFORM REQUIRED ACTS.
If the Borrowing Corporation fails to make any payment or to
perform any required act under this Contract or under any of
the documents related to it, the BANK, after notifying the
Borrowing Corporation, but without waiving any breach or
obligation, will have the right, at its option and without any
obligation to behave in the same manner in the future, to
carry out such act on behalf of the Borrowing Corporation
without considering the validity of such action. Any cost or
amount incurred by the BANK, including but not limited to
attorneys fees and interests, will constitute an
<PAGE> 9
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additional debt of the Borrowing Corporation under this
Contract which shall be payable to the BANK upon request of
payment. Interest on such amounts will accrue at the same
rate as established by this Contract for all agreed upon
obligations hereunder.
M- DEFAULT UNDER OTHER CONTRACTS.
The Borrowing Corporation will comply and perform all
covenants, terms and conditions of all other contracts which
create a lien in favor of the BANK upon the property or
properties that guarantee this credit facility and will notify
the BANK of any omission or breach related thereto. It will
also notify of any other material or substantial breach of any
other contract with any other financial institution or
government agency.
V. NEGATIVE COVENANTS
The Borrowing Corporation covenants and agrees as of the date hereof
and until the full payment and discharge of the principal of and interest on
the loan, unless the BANK shall otherwise consent in writing, that it will
abstain from directly or indirectly doing the following:
A- Debt.
It will not incur, create, assume, or suffer to exist any debt
or obligation for money borrowed secured by the assets offered
as a guarantee of this credit facility, as specified on
Schedule A herein, except in relation to:
1) the notes relating to this credit facility;
2) debt or obligations incurred in good faith
in the ordinary course of business;
3) debt and obligations for lines of credit for
working capital under the terms and
conditions previously approved in writing by
the BANK.
B- SALE OF ASSETS.
1) Without the previous consent of the BANK, which
consent shall not be unreasonably withheld, it will
not sell, transfer or dispose in any form of all or
substantially all of its
<PAGE> 10
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property and/or assets, except for transfers or sales
to corporations affiliated or controlled by the
Borrowing Corporation and/or transactions performed
in the ordinary course of business.
C- CARE OF THE PROPERTY.
It will not neglect or abandon its properties or allow that
any edification or improvement on such property be removed,
demolished or that its structure be totally or partially
altered in a substantially adverse manner, or that any real or
personal property be removed or destroyed; nor will it allow
any act which would diminish the value of its properties.
VI. EVENTS OF DEFAULT
Any of the following events will constitute an event of default under
the terms of this Contract:
A- If any representation made by the Borrowing Corporation to the
BANK in this Contract or in any of the supplemental legal
documents, or if any financial statement, report or
certification offered by the Borrowing Corporation to the BANK
in relation to this credit transaction shall prove to have
been false or deceitful at the time it is delivered or it is
made.
B- The failure to pay principal and interest or any penalties,
if such exist, on their maturity date or due to an
acceleration according to the terms and conditions of this
credit facility or of any of the legal documents involved
and/or related to this Contract.
C- The failure by the Borrowing Corporation to pay any debt or
obligation on its maturity date, or to perform or fulfill any
obligation assumed or incurred in relation to this facility or
any other additional loan or credit facility (existing or to
be granted) extended by the BANK to the Borrowing Corporation
and/or any of its affiliates or subsidiaries, if the effect of
such failure to perform or fulfill an obligation results in
the acceleration of payment of such obligation, allowing the
BANK to declare such debt due before its agreed term, or the
failure to pay upon maturity of all debt or obligation.
<PAGE> 11
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D- The Borrowing Corporation's failure to perform and fulfill, or
the violation of, any of the terms, covenants and conditions
agreed upon with the BANK in Articles IV and V of this
Contract.
E- The material nonperformance by the Borrowing Corporation or by
any of its affiliates or subsidiaries of, or the violation of,
any of the terms, covenants and conditions agreed upon in this
Contract and/or in any loan agreement with any third party
and/or with any other financial institution and/or in any
other loan agreement or credit facility between the BANK and
any of its subsidiaries or affiliates.
F- If the Borrowing Corporation and/or any of its subsidiaries or
affiliates were to become insolvent or unable to pay their
debts as they become due, or if they were to voluntarily file
a bankruptcy petition for reorganization or liquidation, or to
request relief from their debts and obligations under any law,
or to file an answer in or give their consent to any
insolvency, reorganization or other proceedings, seeking
relief from debts or they were to be involved in involuntary
bankruptcy proceedings brought against them by their
creditors, of if they were declared bankrupt or if they were
declared insolvent by any court with competent subject matter
jurisdiction or if they were to assign their assets to their
creditors or a representative of their creditors or if they do
not bond or achieve the dismissal of any embargo or voluntary
bankruptcy or receivership proceeding against them within a
term of thirty days from its filing, or if they were to
suspend operations for more than thirty (30) days or if they
were to permanently discontinue their operations as a going
concern.
G- If against the Borrowing Corporation or any of its
subsidiaries or affiliates a final judgment of over
$2,500,000.00 was entered and such judgment was not paid
within thirty (30) days from the date when such judgment
became final, firm and enforceable.
H- The omission by the Borrowing Corporation or any of its
affiliates and subsidiaries of procuring, obtaining and
maintaining the effectiveness of any approval, permit,
license, or governmental concession which is required of it to
continuously and without interruption operate its primary
commercial activities and deliver its services.
<PAGE> 12
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I- If any court of competent subject matter jurisdiction were to
issue a provisional or permanent injunction order against the
Corporation and/or any of its subsidiaries or affiliates
prohibiting their business operations.
J- The failure by the Borrowing Corporation and/or any of its
subsidiaries and affiliates to remedy or cure within a term of
thirty (30) days from its occurrence, after written
notification from the BANK, any breach of the terms, covenants
and conditions of this Contract not related to the obligation
to pay which are strictly due upon their maturity as agreed.
Upon the occurrence of any of the events of default stated in this
Article and/or in any other part of this Contract, and if such breach is not
cured and remedied within a term of thirty (30) days after the written
notification of the BANK, without the need for further filing, protest, claim,
notification or any kind of notice, which the Borrowing Corporation does hereby
waive, the BANK according to its own discretion will be able to:
a) proceed to claim payment of the unpaid balance and foreclose any
lien or mortgage that guarantees its payment until it obtains a
judicial decree which orders the sale through public auction of such
collateral property to pay a court judgment entered in its favor;
b) file any judicial proceeding requesting specific performance of any
term, covenant or condition of this Contract or of any of the
documents which are part of it or an injunction to keep the Borrowing
Corporation from violating any of such the terms, covenants or
conditions;
c) initiate a judicial proceeding to gain possession of and operate
and manage through a receiver, pursuant to a court order, the
properties offered to the Bank as guarantee and to collect through the
receivership any rent, income or benefit that such properties produce;
or
d) enforce any other remedy to which the BANK is entitled to under the
laws of the Commonwealth of Puerto Rico.
VII. MISCELLANEOUS PROVISIONS
A- LEGAL DOCUMENTS.
For purposes of this Contract, the terms legal documents,
supplemental documents and other docu-
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ments shall mean this Contract and/or any other document
related to this Contract and/or with any other contract
executed by the BANK with any of the subsidiaries or
affiliates of the Borrowing Corporation.
B- WAIVERS AND ADDITIONAL REMEDIES.
No delay on the part of the BANK to exercise any right, power
or remedy that it may have pursuant to the terms of this
Contract or any of the other documents which supplement it,
shall operate as a waiver thereof, including but not limited
to, the right to setoff. The remedies afforded to the BANK in
this Contract and the supplemental legal documents shall be in
addition to all other remedies available at law.
C- AMENDMENTS
No amendment, notification, termination or waiver of any of
the provisions of this Contract, of the notes, guaranty
agreement, assignment and any other legal document which
supplements them, will be valid or enforceable unless it is in
writing and duly executed by authorized officers of the BANK
and under such circumstances such waiver, or consent will be
legally valid and enforceable only with respect to the
specific purpose for which it was executed.
D- NOTICES.
All notifications, claims, demands, or other communication
required by this Contract and/or the legal documents, shall be
in writing and sent by mail or personally delivered to the
following addresses:
First Financial Caribbean Corporation
Avenida F.D. Roosevelt Ncmero 1159
Puerto Nuevo, Puerto Rico 00920
Banco Santander Puerto Rico,
G.P.O. Box 362589
San Juan, Puerto Rico 00936-2589
E- APPLICABLE LAW.
This Contract and any of the legal documents which are part of
it will be construed in accordance with the laws of the
Commonwealth of Puerto Rico.
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F- SUCCESSORS AND ASSIGNS.
The covenants and agreements contained herein will bind and
benefit the parties hereto and their respective successors,
executors, administrators, and assigns.
G- NUMBER AND GENDER.
The use of the singular form herein shall include the plural,
the use of the plural shall include the singular, and the use
of pronouns in any gender shall include the other genders.
H- SEVERABILITY.
Any provision of this Contract or any of the legal documents
which shall be determined to be contrary to any law or public
policy shall be deemed never to have constituted part of this
agreement and it shall not in any form invalidate the
remaining parts of this Contract and/or the legal documents.
I- HEADINGS AND DESCRIPTIONS.
The headings and descriptions of the particular provisions of
this Contract are only inserted to facilitate its lecture,
and not with the purpose that they have any special meaning or
aid in the interpretation of the provision.
J- COSTS AND EXPENSES.
The legal costs of the preparation of this Contract and the
legal documents for the closing of this credit transaction
will be the responsibility of the Borrowing Corporation and
will be paid directly by the BANK to the office of Gonzalez
Oliver, Correa Calzada, Collazo Salazar, Herrero & Jimenez.
K- ACCELERATED MATURITY.
Any breach of the terms and conditions of this Contract by the
Borrowing Corporation will accelerate the maturity of the
obligations agreed to hereby, as well as of all obligations
entered into by its affiliates and subsidiaries with the BANK.
L- ADVANCED PAYMENTS.
The Borrowing Corporation shall be able to make at any time
advanced payments to be credited to the
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unpaid balance of the obligations assumed under this Contract
without paying any penalty.
All other terms and conditions of the loan are included in the
supplemental documents which constitute part of the closing of this
transaction.
The parties executing this contract shall keep the terms and
conditions and the disclosed information in strict confidentiality.
Please indicate your acceptance of the terms included herein, by
signing and returning a copy of this communication.
Cordially,
BANCO SANTANDER PUERTO RICO
P.O. Box 362589
San Juan, Puerto Rico 00936-2589
/s/ E. Belendez Soltero
AGREED AND ACCEPTED:
FIRST FINANCIAL CARIBBEAN
CORPORATION
/s/ Mario S. Levis
- ------------------------------
Mario S. Levis
Vice President and Treasurer
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EXHIBIT "A"
COLLATERAL NOTE
VALUE: DUE DATE:
FOR VALUE RECEIVED, the undersigned, jointly and severally promises to
pay to BANCO SANTANDER PUERTO RICO, (hereinafter referred to as the "Bank"), or
its order, at San Juan, Puerto Rico, the principal sum of
( $ ) in legal tender of the United States of America with annual interest
thereon from the date hereof until full payment at a rate equivalent to One
Hundred Fifty (150) basis points floating in excess of the net cost to Lender
of Eligible Funds as this term is defined in Regulation 5105 issued by the
Commissioner of Financial Institutions, provided said funds are available at
Banco Santander Puerto Rico, and provided further that the use of the funds by
Borrower are considered eligible activity ("actividad elegible") under the then
prevailing regulations. Net cost to Lender will be determined and adjusted
every ninety (90) days. In the event that Eligible Funds are not available at
Banco Santander Puerto Rico or in the event that the use of funds by Borrower
are not considered eligible activity ("actividad elegible") under the then
prevailing regulations, the annual rate of interest on the advances to be made
by Lender to Borrower shall then be the Prime Rate of interest established from
time to time by Citibank, N.A. in the city of New York. The Lender will notify
the Borrower if Eligible Funds are not available prior to the adjustment of the
interest rate as indicated above. Notwithstanding the hereinbefore stated rate
of interest payable hereunder, interest at the rate of Two point Twenty Five
Percent (2.25%) per annum will be paid on the portion of the principal
outstanding balance of the Loan, which shall be equal to the average monthly
balance of the Loan, which shall be equal to the average monthly balance of
certain non-interest bearing escrow accounts maintained by Borrower with
Lender. Interest shall be payable on the last day of each month on so much
funds as may have been advanced and remain unpaid, on a basis of years of 360
days. So long as the applicable rate of interest is based on the net cost to
the Bank of Eligible Funds, the Bank shall give written notice to the
undersigned of the applicable rate of interest on or before the fifth (5th) day
of the corresponding month. Interest shall be payable on the last day of each
month on so much funds as may have been advanced and remain unpaid, on a basis
of years of 360 days.
In the event of judicial process to enforce payment of this note, the
undersigned consents to the venue of the San Juan Sections of the Commonwealth
Courts and agrees to pay jointly and severally all costs, expenses and
disbursements arising from such process, plus attorney's fees for the holder in
an amount equivalent to Five Percent of the original principal amount hereof.
The undersigned waives notice of nonpayment, presentment, demand of
payment and protest.
The Bank may declare this note due before maturity upon the occurrence
of any of the events of default set forth in a Warehousing Loan Agreement
entered into by the undersigned and the Bank on the day of
As security for the payment of this note, as well as any other note,
loan, debt, indebtedness or liability of the undersigned to the Bank due or not
due, present or future, the undersigned has pledged to the Bank on this date
the mortgage notes which are particularly described in Warehousing Schedule
Number a copy of which is made a part hereof and annexed herewith.
<PAGE> 17
The undersigned expressly authorizes and empowers the Bank at its
option, at any time, to appropriate and apply to the payment of this note
and/or any other obligation(s) now existing or hereafter arising of the
undersigned to the Bank, any and all monies now or hereafter in the hands of
the Bank on deposit or otherwise to the credit of or belonging to the
undersigned.
The rate of interest of this Note after maturity is subject to the
provisions of Section 2.2 of Article 2 of the Warehousing Loan Agreement dated
San Juan, Puerto Rico, this day of 19 .
FIRST FINANCIAL CARIBBEAN CORPORATION
-------------------------------------
By:
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EXHIBIT "B"
PLEDGE AGREEMENT
Contract of Pledge entered into between BANCO SANTANDER PUERTO RICO,
(hereinafter called the "Bank"), and FIRST FINANCIAL CARIBBEAN CORPORATION
(hereinafter called the "Client").
1. The Client hereby acknowledges and confesses that it is
indebted to the Bank in the amount of
and as security for the payment of said debt or any other debt,
present or future, including interest thereon, as well as for the
payment of any obligation or liability, direct or contingent, of the
Client to the Bank, due or to become due, whether now existing or
hereafter arising, deposits and pledges with said Bank the property
hereinbelow described.
2. The Client agrees to deliver to the Bank additional collateral
security acceptable to the Bank, or to make payments on account to its
satisfaction, should the market value of all such collateral held by
the Bank at any time suffer any decline, provided, however, that at no
time shall the market value of the collateral held by the Bank
hereunder shall exceed the amount of the indebtedness, of the client.
3. The Client hereby gives to the Bank a lien for the amount of
all such obligations and liabilities upon all securities or other
property now or at any time hereafter given unto or left in the
possession of the Bank by the Client, whether for the express purpose
of being used by the Bank as collateral security, or for any other or
different purpose, and also upon any balance of the deposit amount of
the Client with the Bank.
4. On the non-performance of the promise embodied in paragraph 2
hereof, or upon the non-payment of any of the obligations or
liabilities above mentioned, or upon the failure of the Client
forthwith with or without notice, to furnish satisfactory additional
collateral, or to make payments on account, in case of decline, as
aforesaid, or in case of insolvency, bankruptcy or failure in business
of the Client, then, in any such event, all obligations and
liabilities, direct or contingent, of the Client to the Bank shall
forthwith become due and payable without demand or notice; and full
power and authority are hereby given to the Bank to sell, assign and
deliver, either as a whole or in separate lots or parcels, any and all
securities or other property held by it as collateral hereunder, or
any substitute therefor, or any addition, thereto, or any other
securities or property given unto or left in the possession of the
Bank by the Client, whether for the express purpose of being used by
the Bank as collateral security, or for any other or different
purpose, or in transit to or from the Bank, by mail or carrier, for
any of the said purposes, at public sale, without demand, which is
hereby expressly waived.
5. In case of any sale or other disposition of any
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property aforesaid after deducting all costs and expenses of every
kind for collection, sale or delivery, the Bank may apply the residue
of the proceeds of the sale or sales so made on account of one or more
or all of the said obligations or liabilities to it, making proper
rebate for interest on obligations or liabilities not then due, and
returning the overplus, if any to the Client, who agrees to be and
remain liable to the Bank for any deficiency arising upon such sale or
sales.
6. At any such sale, the Bank may itself purchase the whole or
any part of the property sold, free from any right of redemption on
the part of the Client, which is hereby waived and released, and in
the event of the purchase of any such property by the Bank, the
purchase price thereof, less the fees and expenses of the sale, shall
be credited and applied on the indebtedness or obligations of the
Client to the Bank, the Client remaining liable for any deficiency and
hereby waiving any provision of law giving him a right to a full
discharge of his obligation as it pertains such deficiency.
7. The citation that must be made to the Client, and to the owner
of the pledge, in a proper case, in order to alienate the pledge, will
be made personally to them or in any other legal manner, at the option
of the Bank.
8. The sale shall take place in San Juan, Puerto Rico, or at any
other place within the island of Puerto Rico chosen by the Bank.
9. The Client hereby authorizes and empowers the Bank, at its
option, at any time, to appropriate and apply to the pro tanto payment
and extinguishment of any of the obligations or liabilities
hereinbefore referred to, whether now existing or hereafter
contracted, any and all moneys now or hereafter in the hands of the
Bank, on deposit or otherwise, to the credit of or belonging to the
Client.
10. The Bank is hereby empowered to collect the interest,
dividends, or rent of the property pledged, and at its option to apply
the amount so collected on account of any expenses incurred in
connection therewith or of any other indebtedness or obligations of
the Client to the Bank, either principal or interest.
11. The Bank may transfer the note or notes representing the
Client's obligation to said Bank, and deliver the said collateral
security or any part thereof to the transferee or transferees, who
shall thereupon become vested with all the powers and rights above
given to the Bank in respect thereto; and the Bank shall thereafter be
forever relieved and fully discharged responsibility in the matter.
12. No delay on the part of the holder hereof, in exercising any
rights hereunder, shall operate as a waiver of such rights.
13. In case of litigation, the Client agrees to submit and hereby
submits to the jurisdiction of the
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Court in Puerto Rico which the Bank may select, the Client expressly
waiving any right he may have to be sued in the Court of his domicile.
The Client furthermore agrees to pay all costs and expenses, including
attorneys' fees, incurred by the Bank in connection with said
litigation, and authorizes the Bank to reimburse itself, from the
proceeds for the property herein pledged.
14. The property pledged is as follows:
See Schedule No. _________ attached hereto and made part hereof.
BANCO SANTANDER PUERTO RICO FIRST FINANCIAL CARIBBEAN
CORPORATION
- ---------------------------------- --------------------------------
- ----------------------------------
Affidavit Number
-----------------
Subscribed and acknowledged to before me by
3
<PAGE> 21
EXHIBIT "C"
INSTRUMENTS AND DOCUMENTS TO BE DELIVERED IN PLEDGE
The instruments and documents delivered in pledged under the Agreement
of which this Exhibit forms a part shall be satisfactory in form and substance
to Lender, shall include all instruments and documents required to give Lender
full and effective security in accordance with the provisions of the agreement,
and in the case of each mortgage shall include, but shall not be limited to:
(1) Original of Note subscribed by the owner of the mortgaged
premises and payable to the order of Borrower endorsed in blank by
Borrower. In all FHA and VA cases, the Note shall bear the endorsement
of FHA or in the event the Note has not been endorsed, a certification
acceptable to Lender that an FHA Mortgage Insurance Certificate has
been applied for and will be delivered to Lender within 90 days, if
not, Borrower will repay funds advanced by Lender under that specific
Note.
(2) Simple copy of the deed of Mortgage securing the Note referred
to in (1) above, attested as a true copy by the Notary Public before
whom it was executed.
(3) Within 45 days, evidence acceptable to Lender that a certified
copy of the mortgage deed referred to in (2) above has been duly
presented for recordation at the corresponding Registry of the
Property.
(4) Within 5 days, original Policy of Title Insurance in form and
substance acceptable to the Lender, naming Lender as an insured
thereunder either directly or by endorsement and certifying that the
mortgage deed has been filed for recording. Said Title Insurance
Policy issued by a title insurance company acceptable to Lender for
the full amount of the mortgage, shall be dated on or be effective as
of the date of the final advance under the mortgage and not earlier
than the date the mortgage was presented for recording and in all FHA
and VA Mortgage shall contain all affirmative insurance required by
FHA or VA, as the case may be, and all affirmative insurance required
by the firm purchase commitment and only such exceptions as are
permitted in regulations and releases of FHA or Va, as the case may
be, or as may be approved in writing by Lender and the financial
institution which issued the mortgage purchase commitment. Whenever
exceptions to the title insurance may be permitted in accordance with
the provisions of this subdivision (4), such exceptions shall be
covered by affirmative insurance as noted below:
Exceptions: Affirmative Insurance
---------- ---------------------
Easements Insurance that there are no encroachments
--------- on that portion of the land subject to
such easements, or if there are any such
encroachments, insurance against damage to
encroachments,
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insurance against damage to existing
improvements, including lawn, shrubbery or
trees encroaching thereon, whenever such
damage may be occasioned by the exercise
of the right to use such easement.
Covenants, (a) Insurance that they are not
--------- violated and or, if violated, insurance
conditions against damages or injunctive relief for
---------- such violation, and;
and restrictions
---------------- (b) Insurance that any future
violation will not result in loss or
impairment of the lien of the mortgage or
of title to the land if acquired in
satisfaction of the mortgage debt, and;
(c) Insurance against unmarketability
of title occasioned by any violations
occurring prior to acquisition of title by
the insured.
Encroachments Insurance against damage by reason of any
------------- final court order or judgment requiring
removal of any encroachment from lands,
streets or alleys adjoining the subject
land.
(5) Schedule of loans pledged in such forms as Lender may require.
(6) Notwithstanding anything to the contrary herein contained, the
Borrower shall deliver to Lender, at the time each mortgage note is
pledged, interim policy of title insurance insuring Lender that upon
presentation of the corresponding deed of mortgage of said mortgage
shall constitute a valid first lien on the mortgaged premises.
(7) Certificate to the effect that all first mortgages financed
through this Warehousing Loan Agreement qualify as eligible activity
("actividad elegible"), as this term is defined in Regulation 5105
issued by the Commissioner of Financial Institutions of the
Commonwealth of Puerto Rico.
(8) Within 90 days, one of any of the following: (a) a copy of FHA
or VA insurance commitment, as applicable, for each Mortgage pledged;
(b) HUD Form 92800-5, conditional commitment for Mortgage Insurance;
or (c) HUD Form 92900-4, Firm Commitment for Mortgage Insurance.
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ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT, made this 10th day of October------ 1995,
by and between FIRST FINANCIAL CARIBBEAN CORPORATION, a Puerto Rico corporation
(herein called the "Assignor"), and BANCO SANTANDER PUERTO RICO, a Puerto Rico
banking corporation (herein called the "Assignee").
WITNESSETH:
WHEREAS, the Assignor has requested the Assignee to make a Loan (the
"Loan") in the aggregate amount of NINE MILLION EIGHT HUNDRED EIGHTY FIVE
THOUSAND DOLLARS ($9,885,000.00) dated on even date herewith (the "Loan
Agreement");
WHEREAS, the Assignee has agreed to make such Loan available, and to
provide for the requested credit facility, for the Borrower upon the terms and
subject to the conditions contained in the Loan Agreement;
WHEREAS, it is a condition precedent to the making and maintaining of
the Loan by the Assignee pursuant to the Loan Agreement that the Assignor shall
have executed and delivered to the Assignee an agreement assigning to the
Assignee all of the Assignor's right, title and interest in and to the Assigned
Agreements (as hereinafter defined);
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Assignee to make and maintain the Loan
pursuant to the Loan Agreement, the Assignor hereby agrees with the Assignee as
follows:
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1. DEFINITIONS.
Reference is hereby made to the Loan Agreement for a statement of the
terms thereof. All terms used in this Agreement that are defined in the Loan
Agreement and that are not otherwise defined herein shall have the meanings
herein as set forth therein.
2. ASSIGNMENT.
The Assignor hereby assigns, transfers and sets over to the Assignee
all of the Assignor's right, title and interest in and to the agreements,
proceeds, securities and contracts listed in the list attached hereto as
Schedule I, as such agreements, securities, proceeds and contracts may be
amended or otherwise modified from time to time (hereinafter collectively
referred to as the "Assigned Agreements"), including, without limitation (i)
all rights of the Assignor to receive moneys due and to become due under or
pursuant to the Assigned Agreements, (ii) all rights of the Assignor to receive
proceeds of any insurance, indemnity, warranty or guaranty with respect to the
Assigned Agreements, (iii) claims of the Assignor for damages arising out of or
for breach of or default under the Assigned Agreements, (iv) the right of the
Assignor to terminate the Assigned Agreements, to perform thereunder and to
compel performance and otherwise exercise all remedies thereunder, and (v) to
the extent not included in the foregoing, all proceeds of the Assigned
Agreements.
3. SECURITY FOR OBLIGATIONS.
This Agreement shall not be deemed to constitute an absolute
assignment of the Assignor's right, title and interest in and to the Assigned
Agreements, but an assignment as collateral security for all of the following
obligations, whether now existing or hereafter incurred (the "Obligations"):
3.1. all loans, advances, debts, liabilities, obligations,
covenants and duties owing by Assignor to the Assignee, of any kind or
nature, present
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or future, whether or not evidenced by any note, guaranty or other
instrument, whether arising under this Agreement or under the Note or
under any other agreement, instrument or document, whether or not for
the payment of money, loan, lease, guaranty, indemnification or in any
other manner, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and however acquired. The term includes,
but without limitation, all interest, charges, expenses, fees,
attorneys fees and any other agreement with the Assignee.
3.2. the due performance and observance by the Assignor of all of
the other obligations from time to time existing in respect of the
Collateral.
The Assignee shall not be entitled to exercise its rights hereunder
unless and until an Event of Default resulting in acceleration of the
repayment of the Obligations shall have occurred. Thereupon, the
assignment of the Assigned Agreements hereunder shall become effective
automatically, without necessity of any further act by the Assignee.
4. REPRESENTATIONS AND WARRANTIES.
The Assignor represents and warrants as follows:
4.1. The Assigned Agreements set forth the entire agreement and
understanding of the parties thereto relating to the subject matter
thereof, and there are no other agreements, arrangements or
understandings, written or oral, relating to the matters covered
thereby or the rights of the Assignor in respect thereof.
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4.2. The Assignor owns the Assigned Agreements free and clear of
any lien, or other charge or encumbrance, except for (i) the lien
created by this Agreement, and (ii) the liens and other encumbrances
described in Schedule II hereto. No statement of assignment or other
agreement similar in effect covering all or any part of the Assigned
Agreements is on file in any sections of the Registry of Property of
Puerto Rico, except (i) such as may have been filed in favor of the
Assignee relating to this Agreement, or (ii) such as may have been
filed to perfect any lien or encumbrance described in Schedule II
hereto.
4.3. The exercise by the Assignee of any of their rights and
remedies hereunder will not contravene law or any contractual
restriction binding on or affecting the Assignor or any of its
properties and will not result in or require the creation of any lien,
or other charge or encumbrance upon or with respect to any of its
properties.
4.4. No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or other regulatory body
is required for (i) the assignment by the Assignor to the Assignee of
all of the Assignor's rights, title and interest in and to the
Assigned Agreements and the perfection of the lien purported to be
created hereby in the Assigned Agreements, or (ii) the exercise by any
of the Assignee of any of its rights and remedies hereunder.
4.5. The chief place of business and chief executive office of the
Assignor and the office where the Assignor keeps its records
concerning the Assigned Agreements, and the original copies of the
Assigned Agreements, are located at the address specified for the
Assignor in
<PAGE> 27
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Schedule I hereto. The Assigned Agreements are not evidenced by a
promissory note or other instrument.
4.6. This Agreement creates a valid lien in favor of the Assignee
in the Assigned Agreements as security for the Loan.
4.7. Upon the request of Assignee, the Assignor shall deliver to
the Assignee complete and correct copies of each Assigned Agreement
described in Schedule I hereto, including all schedules and exhibits
thereto, and there will be no other agreements, arrangements or
understandings, written or oral, relating to the matters covered
thereby or the rights of the Assignor in respect thereof. Each
Assigned Agreement is the legal, valid and binding obligation of the
obligor thereunder, enforceable against such party in accordance with
its terms. No default thereunder by the Assignor or the obligor has
occurred, nor does any defense, offset, deduction or counterclaim
exist thereunder in favor of any such parties.
4.8. The Assignor will comply with all Federal, state, and local
laws, and regulations affecting the Assigned Agreement, including,
without limitation, laws and regulations of the Commonwealth of Puerto
Rico.
5. COVENANTS.
So long as the Loan shall remain outstanding, unless the Assignee
shall otherwise consent in writing:
5.1. The Assignor will at its expense, at any time and from time to
time, promptly execute and deliver all further instruments and
documents and
<PAGE> 28
6
take all further action that may be necessary or desirable or that the
Assignee may request in order (i) to perfect and protect the lien
purported to be created hereby, (ii) to enable the Assignee to
exercise and enforce its rights and remedies hereunder in respect of
the Assigned Agreements, or (iii) to otherwise effect the purposes of
this Agreement.
5.2. Without limiting the generality of the foregoing, the Assignor
will (i) if any of the Assigned Agreements shall be evidenced by a
promissory note or other instrument, deliver and pledge to the
Assignee hereunder such note or instrument duly indorsed and
accompanied by duly executed instruments of transfer or assignment,
all in form and substance satisfactory to the Assignee, and (ii)
execute and file such instruments or notices as may be necessary or
desirable, or as the Assignee may request, in order to perfect and
preserve the assignment granted or purported to be granted hereby.
5.3. The Assignor will not (i) sell, assign (by operation of law or
otherwise), exchange or otherwise dispose of any of the Assigned
Agreements, or (ii) create or suffer to exist any lien, attachment, or
other charge or encumbrance upon or with respect to the Assigned
Agreements except for the lien created hereby.
5.4. The Assignor will (i) give the Agent prompt notice of any
change in the Assignor's name, identity or corporate structure, (ii)
keep its principal place of business and principal executive office
and the office where the Assigned Agreements are located at the
location(s) specified in Schedule III hereto, and (iii) keep adequate
records concerning the Assigned Agreements and permit representatives
of the Assignee at any
<PAGE> 29
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time during business hours to inspect such records, the Assigned
Agreements and make copies thereof, subject to the confidentiality
provisions of the Loan Agreement.
5.5. The Assignor will collect, at Assignee expense, all amounts
due or to become due under the Assigned Agreements. In connection with
such collections, the Assignor may (and, at the Assignee's direction,
will) take such action as the Assignor or the Assignee may deem
necessary or advisable to enforce collection or performance of the
Assigned Agreements; provided, however, that the Assignee shall have
the right at any time, upon the occurrence and during the continuance
of an Event of Default, and upon written notice to the Assignor of its
intention to do so, to notify the account debtors or obligors under
the Assigned Agreements of the assignment of the Assigned Agreements
to the Assignee and to direct such account debtors or obligors to make
payment of all amounts due or to become due to the Assignor thereunder
directly to the Assignee and, upon notification, and at the expense of
the Assignor and to the extent permitted by law, to enforce collection
of the amounts due or to become due under the Assigned Agreements and
to adjust, settle or compromise the amount or payment thereof, in the
same manner and to the same extent as the Assignor might have done.
After receipt by the Assignor of the notice from the Assignee referred
to in the proviso to the immediately preceding sentence, (i) all
amounts and proceeds (including instruments) received by the Assignor
in respect of the Assigned Agreements shall be received in trust for
the benefit of the Assignee hereunder, will be segregated from other
funds of the Assignor and will be forthwith paid over to the Assignee
in the same form as so received (with any necessary indorsement) to be
held as cash collateral and either
<PAGE> 30
8
(A) released to the Assignor so long as no Event of Default shall have
occurred and be continuing, or (B) if any Event of Default shall have
occurred and be continuing, applied as specified in subsection 7.3
hereof, and (iii) the Assignor will not adjust, settle or compromise
the amount or payment under any Assigned Agreements or release wholly
or partly any account debtor or obligor thereof or allow any credit or
discount thereon.
5.6. Upon the occurrence and during the continuance of any breach or
default under the Assigned Agreements by any party thereto other than
the Assignor, (i) the Assignor will, promptly after obtaining
knowledge thereof, give Assignor written notice of the nature and
duration thereof, specifying what action, if any, it has taken and
proposes to take with respect thereto, (ii) the Assignor will not,
without the prior written consent of the Assignee, declare or waive
any such breach or default or affirmatively consent to the cure
thereof or exercise any of its remedies in respect thereof, and (iii)
the Assignor will, upon written instructions from the Assignee and at
the Assignor's expense, take such action as the Assignee may deem
necessary or advisable in respect thereof.
5.7. The Assignor will, at its expense, promptly deliver to the
Assignee a copy of each notice or other communication received by it
by which any other party to the Assigned Agreements purports to
exercise any of its rights or affect any of its obligations
thereunder, together with a copy of any reply by the Assignor thereto.
5.8. The Assignor will not, without the prior written consent of the
Assignee, cancel, terminate, amend, modify, or waive any provision of,
<PAGE> 31
9
the Assigned Agreements.
5.9. Any balance of amounts received hereunder from any obligor under
any of the Assigned Agreements after payment of the Loan, shall be
paid by the Assignee to the persons entitled thereto under the terms
of each Assigned Agreement as if this Agreement had not been executed.
5.10. The obligors under the Assigned Agreements are hereby authorized
to recognize the Assignee's claims to rights hereunder without
investigating the reason for any action taken by the Assignee, or the
validity or the amount of the Loan or the existence of any default
therein, or the application to be made by any of the Assignee of any
amounts to be paid to the Assignee. The sole signature of the Assignee
shall be sufficient for the exercise of any rights under the Assigned
Agreements and the sole receipt of the Assignee for any sums received
shall be a full discharge and release therefor to the obligors under
the Assigned Agreements. Upon the occurrence of an event of default
hereunder on the part of Assignor, checks for all or any part of the
sums payable under any Assigned Agreements shall be drawn to the
exclusive order of the Assignee if, when, and in such amounts as may
be requested by the Assignee.
5.11. The exercise of any right, option, privilege or power given
herein to the Assignee shall be at the option of the Assignee, acting
on the instructions of any of the Assignee, but the Assignee may
exercise any such right, option, privilege or power without notice to,
or assent by, or affecting the liability of, or releasing any interest
hereby assigned by the Assignor.
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6. ADDITIONAL PROVISIONS CONCERNING THE ASSIGNED AGREEMENTS.
6.1. The Assignor hereby irrevocably appoints the Assignee or any
successor Assignee as the Assignor's attorney-in-fact and proxy, with
full authority in the place and stead of the Assignor and in the name
of the Assignor or otherwise, from time to time in the Assignee's
discretion, to take any action and to execute any instrument that the
Assignee may deem necessary or advisable to accomplish the purposes of
this Agreement, including, without limitation, (i) to ask,
demand, collect, sue for, recover, compound, receive and give
acquittance and receipt for moneys due and to become due under or in
respect of any of the Assigned Agreements, (ii) to receive, indorse,
and collect any drafts or other instruments, documents and chattel
paper in connection with clause (i) above, (iii) to file any claims or
take any action or institute any proceedings which the Assignee may
deem necessary or desirable for the collection of any sums due under
any of the Assigned Agreements or otherwise to enforce the rights of
the Assignee with respect to any of the Assigned Agreements, (iv) to
endorse the Assignor's name on any checks, notes, acceptances, money
orders, drafts or other terms of payment or security that may come into
the Assignee's possession, (v) to sign the Assignor's name on any
notices of assignment and other public records, on verifications of
accounts and on notices to customers, (vi) to notify the post office
authorities to change the address for delivery of the Assignor's mail
to an address designated by the Assignee, (vii) to receive, open and
dispose of all mail addressed to the Assignor, and (viii) to do all
things necessary to carry out this Agreement. This power, being
coupled with an interest, is irrevocable so long as the Loan remains
unpaid.
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The Assignor hereby ratifies and approves all acts of the Assignee
pursuant to this subsection 6.1, other than those constituting acts of
gross negligence or willful misconduct. The Assignee will not be
liable for any acts or omissions or for any error of judgment or
mistake of fact or law, except claims, losses or liabilities resulting
solely or directly from the Assignee's gross negligence or willful
misconduct.
6.2. If the Assignor fails to perform any agreement contained herein,
the Assignee may perform, or cause performance of, such agreement or
obligation, and the expenses of the Assignee incurred in connection
therewith shall be payable by the Assignor pursuant to subsection 8.2
hereof.
The powers conferred on the Assignee hereunder are solely to protect
the Assignee's interest in the Assigned Agreements and shall not
impose any duty upon the Assignment to exercise any such powers.
Except for the safe custody of any Assigned Agreements in their
possession and the accounting for moneys actually received by them
hereunder, the Assignee shall not have any duty to any of the obligors
under the Assigned Agreements or as to the taking of any necessary
steps to preserve rights against prior parties or any other rights
pertaining to any of the Assigned Agreements.
6.3. Anything herein to the contrary notwithstanding, (i) the Assignor
shall remain liable under the Assigned Agreements to the extent set
forth therein to perform all of its obligations thereunder to the same
extent as if this Agreement had not been executed, (ii) the exercise
by the
<PAGE> 34
12
Assignee of any of its rights hereunder shall not release the Assignor
from any of its obligations under the Assigned Agreements, and (iii)
neither the Assignee shall have any obligation or liability by reason
of this Agreement under the Assigned Agreements, nor shall the
Assignee be obligated to perform any of the obligations or duties of
the Assignor thereunder or to take any action to collect or enforce
any claim for payment assigned hereunder.
7. REMEDIES UPON DEFAULT.
If any Event of Default resulting in acceleration of the repayment of
the Loans shall have occurred and be continuing:
7.1. The Assignee may exercise in respect of the Assigned Agreement, in
addition to other rights and remedies provided for herein or otherwise
available to it at law or in equity, all of the rights and remedies of
an assignee on default under the laws of the Commonwealth of Puerto
Rico.
7.2. All payments received by the Assignor under or in connection with
the Assigned Agreements shall be received in trust for the benefit of
the Assignee, shall be segregated from other funds of the Assignor and
shall be forthwith paid over to the Assignee in the same form as so
received (with any necessary endorsement).
7.3 Any and all cash proceeds received by the Assignee in respect of
or collection from, or other realization upon, any of the Assigned
Agreements may, in the discretion of any Assignee, be held by the
Assignee as collateral for, and/or then or at any time thereafter
applied
<PAGE> 35
13
(after payment of any amounts payable to the Assignee pursuant to
subsection 8.2 hereof) in whole or in part by the Assignee against,
all or any part of the Obligations in the following order or
priorities:
first, to the Assignee, in an amount sufficient to pay in full
the expenses of the Assignee in connection with such
collection or other realization, including all expenses,
liabilities and advances incurred or made by the Assignee in
connection therewith, including, without limitation attorneys
fees;
second, to the Assignee in an amount equal to the then unpaid
principal of and accrued interest and prepayment premiums, if
any, on the Loan; and
third, to the Assignee in an amount equal to any other Loan
which are then unpaid.
Any surplus of such cash or cash proceeds held by the Assignee and
remaining after payment in full of all of the Loan shall be paid over
to the Assignor or to such person as may be lawfully entitled to
receive such surplus.
7.4. In the event that the proceeds of any such collection or
realization are insufficient to pay all amounts to which the Assignee
are legally entitled, the Assignor shall be liable for the deficiency,
together with interest thereon at the highest rate specified in any
Note for interest on
<PAGE> 36
14
overdue principal thereof, or such other maximum rate as shall be
fixed by applicable law together with the costs of collection and the
reasonable fees of any attorneys, employed by the Assignee to collect
such deficiency.
8. INDEMNITY AND EXPENSES.
8.1. In any suit, proceeding or action brought by the Assignee
relating to any Assigned Agreement, or for any sum owing thereunder,
or to enforce any provision of any Assigned Agreement, the Assignor
will save, indemnify and keep the Assignee harmless from and against
all expense, loss or damage suffered by reason of any defense, set
off, counterclaim, recoupment or reduction of liability whatsoever of
the obligor thereunder, arising out of a breach by the Assignor of any
obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to, or in favor of, such
obligor or its successors from the Assignor, and all such obligations
of the Assignor shall be and remain enforceable against and only
against the Assignor and shall not be enforceable against the
Assignee.
8.2. Whether or not the transactions contemplated by this Agreement
shall be consummated, the Assignor agrees to pay to the Assignee all
out-of-pocket costs and expenses incurred in connection with this
Agreement and all reasonable fees, expenses and disbursements, and the
reasonable fees of the Assignee's agents or representatives, incurred
in connection with the execution and delivery of this Agreement and
the performance by the Assignee of the provisions of this Agreement
and of any transactions effected in connection with this Agreement.
<PAGE> 37
15
8.3. The obligations of the Assignor under this Section 8 shall
survive the termination of this Agreement.
9. LIEN INTEREST ABSOLUTE.
All rights and interests of the Assignee and the lien constituted
hereunder, and all agreements and obligations of the Assignor hereunder, shall
be absolute and unconditional, irrespective of:
9.1. any lack of validity or enforceability of the Loan Agreement, the
Note, or any other agreement or instrument relating thereto, so long
as the Loan remains unpaid and outstanding;
9.2. any change in the time, manner or place of payment of, or in any
other term of, of the Loan, or any other amendment or waiver of or any
consent to departure from any Collateral;
9.3. any exchange, release or non-perfection of any lien on or
security interest in, any (other than the Assigned Agreements), or any
release or amendment or waiver of or consent to departure from any
guaranty, for of the Loan; or
9.4. any other circumstance that might otherwise constitute a defense
available to, or discharge of, the Assignor in respect of the Loan or
the Assignor in respect of this Agreement, to the extent permitted by
law.
10. NOTICES.
Except as otherwise provided herein, any notice required hereunder
shall be in writing, and shall be deemed to have been validly served, given or
delivered three (3)
<PAGE> 38
16
days following deposit in the United States mails, with proper postage prepaid,
and addressed to the party to be notified at the following addresses, or at
such other address as each party may designate for itself by like notice, or on
the date of delivery to either party at such address by hand delivery, telex,
telegraph or facsimile transmitter:
If to Assignee: Banco Santander Puerto Rico
207 Ponce de Leon Avenue
Hato Rey, Puerto Rico
Attention: Mr. Eli Belendez
Vicepresident
with a copy to: Gonzalez Oliver, Correa Calzada,
Collazo Salazar, Herrero & Jimenez
P.O. Box 70212
San Juan, Puerto Rico 00936-8212
Attention: Manuel Correa Calzada, Esq.
If to Assignor: First Financial Caribbean Corporation
1159 F.D. Roosevelt Avenue
Puerto Nuevo, Puerto Rico 00920
Attention: Mr. Mario S. Levis
Authorized Agent
11. MISCELLANEOUS.
11.1. No amendment of any provisions of this Agreement shall be
effective unless it is in writing and signed by the Assignor and the
Assignee, and no waiver of any provision of this Agreement, and no
consent to any departure by the Assignor therefrom, shall be effective
unless it is in writing and signed by the Assignee, and then such
waiver
<PAGE> 39
17
or consent shall be effective only in the specific instance and for
the specific purpose for which given.
11.2. No failure on the part of the Assignee to exercise, and no delay
in exercising, any right hereunder or under the Loan Agreement shall
operate as a waiver thereof; nor shall any single or partial exercise
of any such right preclude any other or further exercise thereof or
the exercise of any other right. The rights and remedies of the
Assignee provided herein and in the Loan Agreement are cumulative and
are in addition to, and not exclusive of, any rights or remedies
provided by law.
11.3. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or un enforceability
without invalidating the remaining portions hereof or thereof or
affecting the validity or enforceability of such provision in any
jurisdiction.
11.4. This Agreement shall create a continuing lien on the Assigned
Agreements and shall (i) remain in full force and effect until the
payment in full or release after the termination date of the Loan, and
(ii) be
<PAGE> 40
18
binding on the Assignor and its successors and assigns and shall
inure,together with all rights and remedies of the Assignee hereunder,
to the benefit of the Assignee and their successors, transferees and
assigns.Without limiting the generality of clause (ii) of the
immediately preceding sentence, the Assignee may assign or otherwise
transfer its rights under any Note and any collateral to any other
person, and such other Person shall thereupon become vested with all
of the benefits in respect thereof granted to the Assignee herein or
otherwise. None of the rights or obligations of the Assignor hereunder
may be assigned or otherwise transferred without the prior written
consent of the Assignee.
11.5. Upon the satisfaction in full after the termination date of the
Loan,(i) this Agreement and the lien created hereby shall terminate
and all rights to the Assigned Agreements shall revert to the
Assignor, and (ii)the Assignee will, upon the Assignor's request and
at the Assignor's expense, execute and deliver to the Assignor such
documents as the Assignor shall reasonably request to evidence such
termination.
11.6. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Puerto Rico.
<PAGE> 41
19
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their duly authorized representatives as of the
date first above written.
FIRST FINANCIAL CARIBBEAN BANCO SANTANDER PUERTO
CORPORATION RICO
By: /s/ Mario S. Levis By: /s/ Eli Belendez
--------------------------------- -------------------------------
Name: Mario S. Levis Name: Eli Belendez
Title: Vicepresident & Treasurer Title: Vicepresident
By:
-------------------------------
Name:
Title:
Affidavit Number: 24,199
---------------
Acknowledged and subscribed to before me by Mario S. Levis, of legal
age, married and resident of San Juan, Puerto Rico as Vicepresident & Treasurer
of First Financial Caribbean Corporation Mortgage Corp.; and by Eli Belendez,
of legal age, single, and resident of Guaynabo, Puerto Rico, as Vicepresident of
Banco Santander Puerto Rico, and by Eli Belendez Soltero y Priscilla Rodriguez
Aviles both of legal age, single and married, property owners and residents of
Guaynabo and Carolina, Puerto Rico respectivelly-------------------------------
all of whom are personally known to me in San Juan, Puerto Rico, this 10 day of
NOTARY PUBLIC
<PAGE> 42
SCHEDULE I TO ASSIGNMENT AGREEMENT
See attached list
<PAGE> 43
FIRST FINANCIAL MORTGAGE TRUSTS
CLASS B CERTIFICATES (SUBORDINATED BONDS)
<TABLE>
<CAPTION>
DESCRIPTION OF CERTIFICATES DESCRIPTION OF WHOLE LOAN COLLATERAL
--------------------------- ------------------------------------
EXPECTED EXPECTED ORIGINAL FORECLOSURE
COUPON FACE VALUE AVERAGE LIFE DURATION WAC AVERAGE LIFE WAM LTV LOSSES
------ ---------- ------------ -------- --- ------------ --- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFMT #2 7.40 $ 565,355 6.92 4.67 9.06 5.24 13.17 60.85 0
FFMT #3 7.40 675,374 6.74 4.55 9.10 5.15 12.85 64.02 0
FFMT #4 7.00 708,787 6.41 4.43 9.21 3.63 13.00 61.81 0
FFMT #5 7.00 1,021,693 6.66 4.58 8.58 3.77 13.42 61.92 0
FFMT #6 6.75 306,626 6.81 4.81 8.33 3.78 14.00 63.19 0
FFMT #7 6.00 841,927 6.97 4.94 7.71 4.00 14.00 62.89 0
FFMT #8 6.25 692,366 7.47 5.20 7.43 3.49 14.29 63.84 0
FFMT #9 5.80 1,181,386 7.33 5.15 7.80 3.51 14.01 64.42 0
FFMT #10 6.385 1,315,119 7.65 5.26 7.70 3.79 14.82 64.43 0
FFMT #11 6.35 1,780,379 8.49 5.64 8.29 5.75 16.00 65.40 0
SMSC 95-1 FLOATING 2,105,772 15.01 11.76 8.56 5.60 18.50 66.80 0
-----------
$11,194,875
===========
</TABLE>
Notes:
1. FFMT = First Financial Mortgage Trust
2. SMSC = Structured Mortgage Securities Corp.
All mortgages in all of the above CMO's were originated by FFCC.
<PAGE> 44
SCHEDULE II TO ASSIGNMENT AGREEMENT
Permitted Liens or Encumbrances
None.
<PAGE> 45
SCHEDULE III TO ASSIGNMENT AGREEMENT
1. Principal Place of business:
1159 F.D. Roosevelt Avenue
Puerto Nuevo, Puerto Rico 00920
2. Principal executive office:
1159 F.D. Roosevelt Avenue
Puerto Nuevo, Puerto Rico 00920
3. Office where the Assigned Agreements are located:
1159 F.D. Roosevelt Avenue
Puerto Nuevo, Puerto Rico 00920
<PAGE> 46
PLEDGE AGREEMENT
PLEDGE AGREEMENT, executed this 10th day of October, 1995, by and
between FIRST FINANCIAL CARIBBEAN CORPORATION (hereinafter the"Pledgor") and
BANCO SANTANDER PUERTO RICO (hereinafter the "Bank").
WITNESSETH
1. PLEDGE. As security for all of the obligations (the
"Obligations") arising under the Loan Agreement in the amount of NINE MILLION
EIGHT HUNDRED EIGHTY FIVE THOUSAND DOLLARS ($9,885,000.00), between Pledgor, as
Borrower, and the Bank as the Lender, dated October 10, 1995, copy of which is
attached hereto (the "Loan Agreement"), Pledgor hereby delivers to the Bank in
Pledge the Security identified in Exhibit "A" attached hereto and made a part
hereof (the"Security").
The Bank shall be entitled to hold the Security in pledge until
payment in full of all of the obligations of Pledgor with the Bank under its
credit facility in the amount of NINE MILLION EIGHT HUNDRED EIGHTY FIVE
THOUSAND ($9,885,000.00). At any time after an Event of Default hereunder shall
have occurred and while such Event of Default shall be continuing unremedied,
the Bank shall be entitled, prior to notice to or demand upon the Pledgor, to
foreclose the pledge. "Event of Default" as defined herein shall mean an Event
of Default under the Loan Agreement hereinbefore mentioned
<PAGE> 47
or the default of any of Pledgor's obligations hereunder or under any other
document related to this credit operation.
2. APPLICATION OF FUNDS. Any amounts realized by the Bank
from the foreclosure of the Security shall be applied by the Bank toward the
payment of the Obligations of the obligations of Pledgor with the Bank then
outstanding, which application shall be made (1) to all reasonable costs and
expenses of the Bank (including reasonable attorney's fees incurred in the
collection and foreclosure of the Security, (2) so much of such amounts, if any,
remaining, to the payment of the Obligations then outstanding. Any balance of
such amounts remaining shall be distributed by the Bank to the Pledgor or to
any other person or legal entity who may be legally entitled thereto.
3. LIMITATION OF RIGHTS. The Bank herein acknowledges,
covenants and accepts that the rights of the Bank and its successors and
assigns under this Agreement are limited by and subject to the terms and
conditions of the Loan Agreement, between Pledgor and the Bank as hereinbefore
mentioned.
4. MISCELLANEOUS.
(a) Further Assurances. The Pledgor hereby agrees to promptly execute
and deliver such additional agreements and instruments and to promptly take
such additional action as the Bank may at any time and from time to time
request in writing in order for the Bank to obtain the full benefits and rights
granted or purported to be granted by this Pledge Agreement and Loan Agreement
entered into by and between
2
<PAGE> 48
Pledgor and the Bank of even date herewith and to fully and continually perfect
the Security interests created hereby.
(b) No Waiver: Cumulative Remedies. No failure on the part of the Bank
in exercising any right, power or remedy hereunder or under the Loan Agreement
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy hereunder or under or in
connection with the Loan Agreement. The remedies herein and in the Loan
Agreement are cumulative and not exclusive of any remedies provided by law.
(c) Amendments. No amendment, modification, termination or waiver of
any provision of this Pledge Agreement, nor any consent to any departure by the
Pledgor therefrom shall in any event be effective unless the same shall be in
writing and signed by the Bank, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No notice to or demand on Pledgor in any case shall entitled Pledgor to
any other or further notice or demand in similar or other circumstances.
(d) Costs. Expenses and Taxes. The Pledgor agrees to pay on demand all
reasonable out-of-pocket costs and expenses of the Bank in connection with the
administration of this Agreement and all other instruments and documents to be
delivered in connection therewith, including the reasonable fees and
out-of-pocket expenses of counsel for the Bank with respect thereto and of all
costs and expenses (including legal
3
<PAGE> 49
fees). if any, incurred by the Bank in connection with the enforcement of this
Agreement and all other instruments and documents to be delivered in connection
therewith. In addition, the Pledgor shall pay any and all stamps and other
taxes payable or determined to be payable in connection with the execution and
delivery of this Agreement and all other instruments and documents to be
delivered in connection therewith.
(e) Notices. Any notice required or permitted to be given under this
Agreement must be in writing and either sent by certified or registered mail,
or delivered by hand, in both instances return receipt requested, to the
respective addresses of the parties stated in this Agreement, or to such other
addresses as the parties may designate from time to time in accordance with the
terms of this Paragraph. If to the Borrower, addressed to the attention of MR.
MARIO S. LEVIS, or as to each party at such other address as shall be
designated by such party in a written communications shall, when mailed, or
telegraphed, be effective when sent.
(f) Effectiveness of this Pledge Agreement; Binding Effect,
Assignment. This Pledge Agreement shall be binding upon and inure to the benefit
of the Bank and its successors and assigns, and shall be binding upon the
Pledgor and upon its successors and assigns.
(g) Severability of Provisions. Any provision of this Pledge Agreement
which is prohibited or unenforceable in Puerto Rico shall be ineffective only
to the extent of such prohibition or unenforceability, without invalidating the
remaining provisions
4
<PAGE> 50
hereof or affecting the validity or enforceability of such provision in any
other jurisdiction.
(h) Headings. Section headings used in this Pledge Agreement are for
convenience or reference only and do not constitute part of this Pledge
Agreement for any other purpose.
(i) Construction. This Pledge Agreement shall be construed in
accordance with and governed by the laws of the Commonwealth of Puerto Rico and
the Pledgor hereby submits to the exclusive jurisdiction of the San Juan
Section of the Superior Court of Puerto Rico, for any and all controversies
that may arise in connection with this Pledge Agreement or the instruments
and/or transactions contemplated thereunder.
IN WITNESS WHEREOF, the Parties hereto have caused this Pledge
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the date first above written.
BANCO SANTANDER PUERTO RICO FIRST FINANCIAL CARIBBEAN
CORPORATION
- ---------------------------------- ----------------------------------
- ----------------------------------
Affidavit Number 24,198
------------
Acknowledged and subscribed to before me by Mister Mario S. Levis, as
Vice-President and Treasurer of First Financial Caribbean Corporation, of legal
age, married and resident of San Juan, Puerto Rico; and by Eli Belendez Soltero
and Priscilla Rodriguez Aviles-------------------------------------------------
5
<PAGE> 51
both of legal age, single and married, property owners and residents of
Guaynabo and Carolina, Puerto Rico respectivelly ----------------------- as
Authorized Agents of Banco Santander Puerto Rico, personally known to me, at
San Juan, Puerto Rico, this 10th day of October, 1995.
NOTARY PUBLIC
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF FIRST FINANCIAL CARIBBEAN CORPORATION FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 57,595
<SECURITIES> 456,610
<RECEIVABLES> 19,946
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 11,388
<DEPRECIATION> 4,696
<TOTAL-ASSETS> 821,145
<CURRENT-LIABILITIES> 0
<BONDS> 6,646
<COMMON> 7,244
0
174
<OTHER-SE> 94,373
<TOTAL-LIABILITY-AND-EQUITY> 821,145
<SALES> 0
<TOTAL-REVENUES> 67,351
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 18,988
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,892
<INCOME-PRETAX> 16,471
<INCOME-TAX> 1,976
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,495
<EPS-PRIMARY> 1.99
<EPS-DILUTED> 1.91
</TABLE>
